CHAPTER I

INTRODUCTION

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 ARBITRAGE PRICING THEORY

DEFINITION

APT. An alternative asset pricing model to the Capital Asset Pricing Model.
Unlike the Capital Asset Pricing Model, which specifies returns as a linear function of
only systematic risk, Arbitrage Pricing Theory may specify returns as a linear function of
more than a single factor.
Fundamental Analysis

This investment strategy involves evaluating a stock by examining the company,

especially its operations and its financial condition. Here we look at several valuation
methods, factoring in price/earnings ratio, PEG, dividend yields, book value, price/sales
ratio, and return on equity.
Stock Strategies

Learn about various strategies for investing in stocks, including the “buy and hold
approach,” analyzing market timing, and estimating a company‟s potential for growth.
Stocks and Your Portfolio

I like this company, but should I add it to my portfolio? This article talks about
diversification and balancing risk with your stock selections.

The Arbitrage Pricing Theory (APT) was developed primarily by Ross (1976a,
1976b). It is a one-period model in which every investor believes that the stochastic
properties of returns of capital assets are consistent with a factor structure. Ross argues
that if equilibrium prices offer no arbitrage opportunities over static portfolios of the
assets, then the expected returns on the assets are approximately linearly related to the
factor loadings. (The factor loadings, or betas, are proportional to the returns‟ co
variances with the factors.) The result is stated in Section 1. Ross‟ (1976a) heuristic
argument for the theory is based on the preclusion of arbitrage. This intuition is sketched
out in Section 2. Ross‟ formal proof shows that the Linear pricing relation is a necessary
condition for equilibrium in a market where agents maximize certain types of utility. The
subsequent work, which is surveyed below, derives either from the assumption of the

2
preclusion of arbitrage or the equilibrium futility-maximization. A linear relation between
the expected returns and the betas is tantamount to an identification of the stochastic
discount factor (SDF). Sections 3 and 4, respectively, review this literature.

The APT is a substitute for the Capital Asset Pricing Model (CAPM) in that
both assert a linear relation between assets‟ expected returns and their covariance with
other random variables. (In the CAPM, the covariance is with the market portfolio‟s
return.) The covariance is interpreted as a measure of risk that investors cannot avoid by
diversification. The slope coefficient in the linear relation between the expected returns
and the covariance is interpreted as a risk premium. Such a relation is closely tied to
mean-variance efficiency, which is reviewed in Section 5. Section 5 also points out that
an empirical test of the APT entails a procedure to identify at least some features of the
underlying factor structure. Merely stating that some collection of portfolios (or even a
single portfolio) is mean-variance efficient relative to the mean-variance frontier spanned
by the existing assets does not constitute a test of the APT, because one can always find a
mean-variance efficient portfolio.

Consequently, as a test of the APT it is not sufficient to merely show that a

setoff factor portfolio satisfies the linear relation between the expected return and its
covariance with the factors portfolios.
A sketch of the empirical approaches to the APT is offered in Section 6, while
Section 7 describes various procedures to identify the underlying factors. The large
number of factors proposed in the literature and the variety of statistical or ad hoc
procedures to find them indicates that a definitive insight on the topic is still missing.
Finally, Section 8 surveys the applications of the APT, the most prominent being the
evaluation of the performance of money managers who actively change their portfolios. 1
Unfortunately, the APT does not necessarily preclude arbitrage opportunities over
dynamic portfolios of the existing assets. Therefore, the applications of the APT in the
evaluation of managed portfolios contradict at least the spirit of the APT, which obtains
price restrictions by assuming the absence of arbitrage.

Arbitrage is an often-used term in share markets. The arbitrager is an important

intermediary that helps in price discovery mechanism in all markets be it equity,

3
moneyforex or derivatives. There are three important participants that are important in a
cash market, the speculator, arbitrager and an investor. In futures market the investor is
replaced by a hedger. Arbitrager and Speculator are often confused and both are termed
as Speculators. In this article I wish to explain the difference between the two and show
how arbitrage works in the market and its influence on market volatility.

Arbitraging in India has been going on for several years. Initially arbitrage
activity was between Stock Exchange Mumbai and all other regional exchanges. Mr.
Babulal Bagri the founder of BLB Securities and Mr. ManubhaiManeklal were legendary
arbitragers of that era. They traded between Mumbai, Delhi and Calcutta markets.
Arbitraging in those days was done manually and not on any online system. The way the
fingers of these brokers flew on telex machines giving trade instructions was an
experience by itself. Then it shifted to cashing on price difference between NSE and BSE
limited. Today large amount of arbitrage happens between cash and derivative markets.
Arbitrage is also possible between the current month and near or far month contracts. In
case of Commodity exchanges also there is an arbitrage opportunity between the local
cash markets or mandis and the future markets which are popularly known as National
Commodity Exchanges.

Speculator is one who gives liquidity to the markets. The buyers and sellers may
not often decide at the same time to buy or sell a security. There is a time gap as well as a
difference in price and quantity at which the buyer and seller intend to do a transaction.
The speculator fills this time gap and gives quotes to buyers as well as sellers on a
continuous basis. This imparts liquidity to the market since each order has a counter offer
from a speculator even if there is no counter party to match the order.

The arbitrager is one who plays the role of balancing the price differences across
the markets. The markets may be two exchanges trading in the same product or two
segments such as cash and derivatives or across international markets and local markets.
The arbitrager continuously tracks prices across the chosen segment. are momentary price
differences in two markets due to difference in level of information as well as demand
supply situation in the market. These price differences are an opportunity for the
arbitrager.

4
 The arbitrager has money power at his disposal. He takes deliveries in a particular
market segment and is able to give deliveries in another market segment. There is a time
gap between giving and taking deliveries. He holds the stock for this time and earns an
interest on the funds invested which comes by way of price differential between buy and
sell rates. The arbitrager has a particular interest return as his target. He does not have
any open positions and all his purchases or sells in a particular market segment have a
counter position in another market segment. At the net level his position is always zero.
This is how the arbitrager earns a risk free return.

The arbitrager does not always wait for the expiry of the contract or the settlement
of the transaction. They may reverse the position before the actual settlement date even if
they have to compromise on some percentage of the price difference earned by them.
Lesser return is acceptable if it is earned with smaller or no investment. All decisions are
taken with reference to a benchmark-targeted return.

To give example of an arbitrage transaction, assume that the arbitrager has Rs.10
lacs available for doing arbitrage activity. His targeted return is say 18% p.a. which
works to about 1.5% p.m. We will take a simplistic transaction where he does just one
trade to earn the return. If some share is quoting at Rs.1000 in one cash market he will
look for opportunity to buy at Rs.1000/- and sell at Rs.1015/- or more in another cash
market simultaneously. These markets must have different settlement dates otherwise in
current rolling settlement scenario it is not possible to give and receive delivery since
both happen on the same day.

Now the same example can be extended to cash and derivative segment. Shares
are purchased in cash market; and sold in futures market. Delivery of the shares is
received in the rolling settlement. Since deliveries are not permitted in futures market a
reversal opportunity is looked for before the expiry of contract, otherwise the arbitrager
will be left with the delivery of shares. Hence if he gained say Rs.25 per share on the first
leg he will reverse the trades up to a loss of Rs.10 in order to achieve his benchmark
return of Rs.15.The returns are not often as fantastic but opportunities are many. We also
have to deduct from this the cost of brokerage, Securities transaction tax, stock exchange
charges and stamp duty. Hence it becomes unviable for an investor unless the transaction

5
costs are very low. The price difference is only for a few minutes or seconds hence it
must be captured instantly through a speedy trading system. It should not so happen that
one transaction is done and the other one does not go through i.e. if the arbitrager buys
and is unable to sell and the market falls then instead of making a profit he will end up
with a loss. Automated trading programs are used in order to release both orders so that
both the prices are captured simultaneously.

Arbitrage activity thus adds to liquidity in the markets and also helps in balancing
the prices of same shares across various markets. Prices continuously balance out once
the differences are cash upon. Arbitrage Helps in reducing volatility in markets since
continuous flow of orders reduces impact cost and more depth means less volatility.

A small investor may not always be able to capture small differences in prices.
They are not constantly in front of the trading screen nor do they have sophisticated
trading systems to execute the orders. They are often linked to Internet or a network
connection that is not direct feed into the stock exchange system i.e. BOLT or NEAT.
Streaming quotes on online trading is closest that is available for such trading. Best
strategy is to look for difference in shares prices of stocks that you already have, hence
delivery is not a problem. Otherwise it is a volume game, small returns over thousands of
transactions is the name of the game. It is advisable to study the opportunities. You may
not act on all of them, but it prepares you to invest your money wisely when you are a
Billionaire….

ARBITRAGE STRATEGIES
Arbitrage is a strategy involving a simultaneous purchase and sale of identical
or equivalent instruments across two or more markets in order to benefit from a
discrepancy in their price relationship. It is a risk-free transaction, as the long and short
legs of the transaction offset each other exactly. Thus, arbitrage engages in a strategy in
order to reduce risk of loss caused by price fluctuations of securities held in the portfolio.
It involves buying and selling of equal quantities of a security in two different markets,
with the expectations that a future change in price will offset by an opposite change in the
other.

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 Daily turFEBer in the derivatives segment is around 3.5 times the cash market
volumes and is to the tune of Rs 30,000 crores. Arbitrage activity is largely concentrated
in single stock futures, while index arbitrage is not very popular, although it contributes
about 25-30% of the total stock futures volumes. In India, stock borrowing in the cash
market is cumbersome, making the “Sell Stock buy Futures” strategy difficult; hence,
almost the entire arbitrage activity is concentrated in “Buy Stock-Sell Futures”.4

ADVANTAGES OF ARBITRAGE STRATEGY

 ◻ Capitalises opportunities of mis-pricing (cost of carry) between cash and

derivatives.
 ◻ It is safe, as it does not carry equity market risk, as all equity positions are
completely hedged.
 ◻ Potential returns are higher than comparable investment avenues with similar
risks.
 Benefits of investing in an Arbitrage Fund
 ◻ Since the arbitrage fund is categorized as equity fund, there will be no tax on
Long-Term capital gains;
 Dividends are also tax-free.
 ◻ Potential returns are higher than those in comparable investment avenues with
similar risks like bank
 Fixed-deposits or liquid schemes.
 ◻ It does not carry risk equivalent to the equity market risk, as all equity positions
are hedged.

CONCLUSION

The Arbitrage Fund, in such uncertain times, can prove to be one of the good
choices by investors, other than putting the money in fixed deposits. The Fund House is
claiming a return of around 9-9.9%, which is much better than that of many other savings
instruments. However, finding an arbitrage opportunity in a bear phase is very

7
 CHAPTER II
REVIEW OF LITERATURE

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 REVIEW OF LITERATURE

A derivative is a synthetic construction designed to give the same profile of returns as

some underlying investment or transaction, without requiring the principal cash outlay.
They are called derivatives because they derive their value from the performance of the
underlying instrument. Financial derivatives can be found in debt, equity, currency and
commodity markets”. The examples of derivatives include futures, forwards, options and
swaps. In simple words derivatives is a financial model which includes a wide range of
financial contracts including forwards, futures, options and swaps which helps
corporation to achieve success in the market. Srisha (2001) opines derivatives allow
financial institutions and other participants to identify, isolate and manage separately the
market risks in financial instruments and commodities for the purpose of hedging,
speculating, arbitraging price differences and adjusting portfolios risks. According to
Jiwarajika (2000), “Derivatives are used as a tool of risk management; the risks are
associated with derivatives including market risk, credit risk and liquidity risks. The risks
are directly related to size and price volatility of the cash flows they represent they are to
the size of the notional amounts on which the cash flows are based.” Volker (2004)
defines derivatives as “financial instruments which can be traded (e.g. options, warrants,
rights, futures contract, options on futures, etc.) on various markets. They are called
derivatives because they are “derived” from some real, underlying item of value (such as
company share or other real, tangible commodity.) A derivative is a tradable “contract”,
created by exchangers and dealers. A warrant or option is the simplest form of derivative.

The most common usage relates to the trading of commodities futures and options
on futures-where pre-defined contracts relating to a right to buy or sell and underlying
commodity or security are traded as opposed to the actual commodity or security itself.”
NPV, APT and CAPM are few such financial models which are part of derivatives;
corporations use these models in addition with derivatives to achieve success. Thus, as
mentioned above by diverse authors, that derivatives have various products/variants
which play a vital role in the market for any institution; they are Forwards, Futures,
Options and Swaps.

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FORWARDS

A forward contract is an agreement between two parties calling for delivery of,
and payment for, a specified quality and quantity of a commodity at a specified future
date. The price may be agreed upon in advance, or determined by formula at the time of
delivery or other point in time. Beside other instruments, such as Options or Futures, it is
used to control and hedge risk, for example currency exposure risk (e.g. forward contracts
on USD or EUR) or commodity prices (e.g. forward contracts on oil). The forward price
usually gives a good estimation of the market price in the future. D.C. Patwari and
Anshul Bhargava explains in simple words that a forward contract is an agreement
between two persons for the purchase and sale of a commodity or financial asset at a
specified price to be delivered at a specified future date. One of the parties to a forward
contract assumes a long position and agrees to buy the underlying asset at a certain future
date for a certain price. The specified price is referred to as the delivery price. The parties
to the contract mutually agree upon the contract terms like delivery price and quantity.

FUTURES
A Futures Contract is a standardized contract, traded on a futures exchange, to
buy or sell a certain underlying instrument at a certain date in the future, at a pre-set
price. The future date is called the delivery date or final settlement date. The pre-set price
is called the futures price. The price of the underlying asset on the delivery date is called
the settlement price. The futures price, naturally, converges towards the settlement price
on the delivery date”. In simple words, Web 4 opines a “futures contract as a
standardized, transferable, exchange-traded contract that requires delivery of a
commodity, bond, currency, or stock index, at a specified price, on a specified future
date. Unlike options, futures convey an obligation to buy. The risk to the holder is
unlimited, and because the payoff pattern is symmetrical, the risk to the seller is
unlimited as well. Dollars lost and gained by each party on a futures contract are equal
and opposite. In other words, a future trading is a zero-sum game. Futures contracts are
forward contracts, meaning they represent a pledge to make a certain transaction at a
future date. The exchange of assets occurs on the date specified in the contract. Futures
are distinguished from generic forward contracts in that they contain standardized terms,

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trade on a formal exchange, are regulated by overseeing agencies, and are guaranteed by
clearing houses. Also, in order to insure that payment will occur, futures have a margin
requirement that must be settled daily. Finally, by making an offsetting trade, taking
delivery of goods, or arranging for an exchange of goods, futures contracts can be closed.

Hedgers often trade futures for the purpose of keeping price risk in check also
called futures”. Sirisha (2001) continues explaining the Types of Futures which are as
follows:
ƒ Foreign Exchange Futures
ƒ Currency Futures
ƒ Stock Index Futures
ƒ Commodity Futures
ƒ Interest Rate Futures

OPTIONS

An Options Contract is the right, but not the obligation, to buy (for a call option)
or sell (for a put option) a specific amount of a given stock, commodity, currency,
index, or debt, at a specified price (the strike price) during a specified period of time. For
stock options, the amount is usually 100 shares. Each option contract has a buyer, called
the holder, and a seller, known as the writer. If the option contract is exercised, the writer
is responsible for fulfilling the terms of the contract by delivering the shares to the
appropriate party. In the case of a security that cannot be delivered such as an index, the
contract is settled in cash. For the holder, the potential loss is limited to the price paid to
acquire the option. When an option is not exercised, it expires. No shares change hands
and the money spent to purchase the option is lost. For the buyer, the upside is unlimited.

Option contracts, like stocks, are therefore said to have an asymmetrical payoff
pattern. For the writer, the potential loss is unlimited unless the contract is covered,
meaning that the writer already owns the security underlying the option. Option contracts
are most frequently as either leverage or protection. As leverage, options allow the holder
to control equity in a limited capacity for a fraction of what the shares would cost. The
difference can be invested elsewhere until the option is exercised. As protection, options

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can guard against price fluctuations in the near term because they provide the right
acquire the underlying stock at a fixed price for a limited time risk is limited to the option
premium (except when writing options for a security that is not already owned).
However, the costs of trading options (including both commissions and the bid/ask
spread) is higher on a percentage basis than trading the underlying stock. In addition,
options are very complex and require a great deal of observation and maintenance also
called option”.

Hull (1995) opines that there are two different types of options which are as follows:
ƒ Call Option
ƒ Put Option
(CF- Glossary of Terms)

Edwards (2000) critically evaluates “Asian Options are different and are average
rate options. At the end of the contract period, the strike rate is compared with the
average rate observed for the currency exchange. If the strike price is favorable to the
holder of the Asian Options, the option is exercised by the way of cash settlement. Asian
options are useful for hedging currency exposure where management accounts are
translated on an average rate for the accounting period and are misleading cheaper that
American or European options. They simply cost less because of the statistical fact that
an average of a price series is more stable than any particular price series. Asian options
are cash settled automatically”.

SWAPS

A swap is a derivative, where two counterparties exchange one stream of cash

flows against another stream. These streams are called the legs of the swap. The cash
flows are calculated over a notional principal amount. The notional amount typically does
not change hands and it is simply used to calculate payments Swaps are often used to
hedge certain risks, for instance interest rate risk. Another use is speculation.

The notional amount typically does not change hands and it is simply used to
calculate payments.

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TYPES OF SWAPS
There are two basic kinds of swaps:
ƒ Currency Swaps
ƒ Interest Rate Swaps
Edward (2000) argues that Currency Swaps involve exchange of currencies at specified
exchange rates and to make a series of interest payments for the currency that is received
at specified intervals. Today, interest rate swaps account for the majority of banks swap
activity and the fixed for floating rate swap is the most common interest rate swap. In
such a swap one party agrees to make a floating rate interest payment in return for fixed
rate interest payments from the counterparty, with the interest rate calculations based on
hypothetical amount of principal called the notional amount.

HEDGERS
Hedgers are attracted to the derivative market to reduce a risk they already face. A
hedge is a position in order to offset the associated risk with the movement of price of an
asset and to reduce the risk with the use of derivatives. A hedger is a trader who enters
the future market to reduce a pre- existing risk.

SPECULATORS
In contrast to hedgers who want to reduce or eliminate their risk, speculators take
a position in the market, thereby increasing their own risk. Speculators buy and sell
derivatives to make profit and not to reduce their risk. Speculators wish to take a position
in the market by betting on future movement of price of an asset. Futures and options
both increase the potential gain and losses in a speculative venture. Speculators are
attracted to exchange traded derivative products because of their high leverage, high
liquidity, low impact cost, low transaction cost and default risk behavior. It is the
speculators who keep the market going because the bear the risks, which no one else is
willing to bear.

ARBITRAGEURS
An arbitrageur is basically risk-averse and enters into those contracts where he
can earn riskless profits. It is possible to make riskless profits by buying one market and

13
simultaneously selling in another, when markets are imperfect (long in one market and
short in one market). Arbitrageurs always look out on such price differences.
Arbitrageurs fetch enormous liquidity to the products, which are traded on
exchanges. The liquidity in-turn results in better price discovery, lesser market
manipulation and lesser cost of transaction.

As mentioned by D.C. Patwari and Anshul Bhargava, these participants are very
essential for the market in derivatives. According to Murti 2000, “the hedgers, the
speculators and the arbitrageurs all three must co-exist. A hedger is always risk averse.
Typically in India he may be a treasurer in a public sector company who certainly wants
to know the cost of interest for the year 2002, therefore based on the current information,
he would enter into a future contract and lock up the rate of interest four years hence. But
he consciously ignores what is called the upside potential (here the possibility that the
interest rate may be lower in 2002 that what he had contracted for four years earlier. A
hedger therefore plays it safe. To complete the hedging transaction, there must be another
person willing to take advantage of the movement of price that is the speculator. The
speculator thrives on uncertainties while the hedger avoids them. The speculator stands to
gain enormously if he is proved correct but if the speculator forecast wrong then he may
lose plenty of money. An integral part of derivative market is the risk taking associated
with speculation. The arbitrageur is the third category of participant, who looks at riskless
profit by buying and selling simultaneously, the same or similar financial products in
various markets. There is a possibility to take advantage of space or time differentials that
exist, as markets are seldom perfect. Arbitrage evens out the price variations.

In simple words, for healthy functioning of the derivative market, all the three
types of participants are required. The market would become mere tools of gambling if
without hedgers, as they provide economic substance to this market. Speculators provide
depth and liquidity to the market. Arbitrageurs help in bring price discovery and price
uniformity. The presence of the three participants not only enables the smooth
functioning of the market in derivatives but also helps in increasing the market liquidity
as well.

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 CHAPTER III
RESEARCH METHODOLOGY

15
 OBJECTIVES OF THE STUDY
The objective of the study is to analyze the possibility of taking advantage of arbitrage
mechanism of the blue chip scrip‟s of core sectors of Indian economy, traded in BSE and
NSE.

 Ten blue chip scrip of five core sectors are studied for evaluation.

 The share prices of these scrip‟s are being taken for analysis for the period of two
months, JANUARY 2022 and FEBRUARY 2022.

 Closing prices of each share in the two exchanges are taken for analysis.

 The difference in the prices is analyzed for any scope of arbitration.

 Trading in NSE occurs simultaneously along with the regional stock exchanges.
Thus, it intends to facilitate equal access to investors across the country.

 NSE ensures fairness, efficiency and transparency of securities trading.

 It aims at shorter settlement cycle and book entry settlement system.

 NSE also aims at achieving international standards in respect of securities market.

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 NEED FOR THE STUDY:

 The study revolves around the basic need to learn the tools and methods of using
those tools that a technical analyst possesses in order to take an informed decision
on stocks. The purpose of the study is more on the practical knowledge gaining
side as well as developing a sound footing to advice people in investing.
 It is to give better suggestion to the investor on their investments in the selected
companies in the stock market.
 The project also gives scope how to go about investing in the few selected
companies in the stock market.
 Press Trust of India publishes information about the owner of the scrips and the
number of scrips owned by a specific person.

 The trading members in the capital market are linked to the computer in Mumbai
through satellite. Likewise, the trading members in the wholesale debt market
segment are linked to the computer in Mumbai.

 The trading members place order with the NSE stating the conditions in terms of
price, time or size. On placement of the order, an order confirmation slip is
prepared. The computer system searches for a match and the deal is struck.

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 SCOPE OF THE STUDY:

 The scope of the study is limited to few selected companies.

 The selected companies are related to the Banking sector, Information
Technology (IT) sector, Manufacturing sector and Automobile sector.
 The project relates only some of the selected companies from various sectors.
 The project only deals with shares, their prices, ups and downs of the stock
market.
 It is just to forecast the stock market and give appropriate suggestions to investors
 The data that is taken is limited to the few selected companies from various
sectors which are based on the results of their market share in the stock market.

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 RESEARCH METHODOLOGY:

RESEARCH METHODOLOGY USED IN PROJECT

Ho. There is no difference between observed and expected frequencies.

H1: there is difference between observation and expectation

Research Methodology is purely about data collection of the project.

Data collection is important for any project to be completed. Thus, data collection holds a
prima facie important view in the eyes of the analyst.

SOURCES OF DATA:
Primary data: The primary data has been collected through discussion with the
external guide of India Infoline.

Secondary data: The data is collected mainly through the secondary data like various
text books, newspapers, internet and journals.
Vast volumes of data of prices and volumes on a daily basis for almost 4 years were
obtained from one reliable website. The entire data has been used in the analysis for
arriving to a conclusion.

Proposed statistical Tools for the study

Descriptive statistics- mode , percentages, frequencies, bar graphs and pie

charts

Mann-Whitney Test

Correlation Analysis

Chi-square

Ratio Analysis

TOOLS USED IN THE ANALYSIS

 Statistical tools

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  Financial tools

Research gap

Period of study
4 years data Time gap 2016 completed study from 2016_2022

LIMITATIONS OF THE PROJECT:

 The project is based on the technique of technical analysis of stocks for providing
recommendations to investors with respect to which stocks to add or deduct from
their portfolios for maximizing gains.
 The main limitation is that the study has impacted the way the analysis could have
been conducted was the lack of proper technical analysis software. This would have
assisted and enabled us to provide a clearer picture for the purpose of decision
making.
 Complete data was not available due to company privacy and secrecy.
 The data for doing this project has been collected from internet, company websites,
books where there can be some hitches.
 General people may not understand the study that much easily.

20
 CHAPTER IV
THERETICAL FRAME WORK

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Arbitrage is the practice of taking advantage of a price difference between two or more
markets or exchanges. In Indian markets, stocks trade in the two major exchanges – NSE
(National Stock Exchange) and BSE (Bombay Stock Exchange). It means you can take
advantage of buying the stock in one exchange and selling it in another and bag the
difference as profit.
In the Indian market, stocks trade in NSE (National Stock Exchange) as well as BSE
(Bombay Stock Exchange). So one has the option of buying stock in one exchange and
sell it in the other one.
1. Arbitrage is not An Intraday Trade (Cost Wise)
You are not allowed to buy and sell the same stock in different exchanges on the same
day. It means if you buy stock XYZ today in NSE, then you are not allowed to sell stock
XYZ in BSE the same day. If you do that, you may have a penalty of short selling in the
exchange you sold.
It means you can only do arbitrage for stocks that you have in your DP. If you have stock
XYZ in your DP, you can sell the same in BSE and buy them in NSE as well to bag a
profit but then you are not doing intraday trading, and so you may be paying the
brokerage of delivery to your broker though you are trading on the same day – time-wise.
2. Last Traded Price is not the Price for Arbitrage
If you see a price difference of few Rupees in both the exchanges does not always mean
there is arbitrage. Take an example of Weizmann Forex.
The growing importance of stock markets around the world has recently opened a new
avenue of research into the relationship between financial development and economic
growth, which focuses on the effect ofstock market development (Arestis, Demetriades
and Luintel, 2001, p. 16). The general idea that economic growth is related to financial
development can go back at least to Schumpeter(1912) and more recently to
McKinnon (1973) and Shaw (1973). Fischer (2003) emphasizes that the most important
and thorough early contribution on financial development and economic growth came
from Joseph Schumpeter who, in his book (The Theory of Economic Development),
said:
The banker… is not so much primarily a middleman in the commodity purchasing power
as a

22
producer of this commodity… He stands between those who wish to form new
combinations and
the possessors of productive means. He is essentially a phenomenon of development,
though
only when no central authority directs the social process. He makes possible the carrying
out of
new combinations, authorizes people, in the name of society as it were, to form them. He
is the
ephor [overseer] of the exchange economy (Schumpeter, 1912, p. 74)
Theoretically, the link between financial intermediation and economic growth stems
from the insights of endogenous growth models, in which economic growth is
selfsustaining without exogenous technical progress and influenced by various initial
attributes of the economy. In this framework, financial intermediation is shown to not
only have level effects, but also growth effects (Agarwal, 2001).
More recently, the emphasis has increasingly shifted to stock market measures and the
effect of stock market development on economic growth. Caporal, Howells and Soliman
(2004) describe briefly that a well-developed stock market is supposed to increase
saving and efficiently allocate capital to productive investments, which leads to an
increase in the rate of economic growth. On the other hand, stock markets contribute to
the mobilization of domestic saving by enhancing the set of financial instruments
available to savers to diversify their portfolios and play a key role in allocating capital
to the corporate sector, which will have a real effect on the overall economic growth.
This chapter is organized as follows. The next section presents the empirical evidence
on finance and economic growth for the Arab countries. Section three discusses the
contradictory views of overall financial development and stock market development on
economic growth. In section four, we evaluate critically the existing literature. Section
five describes the empirical literature that used data on an industry and firm-level.
Section six presents some of the empirical studies based on time series and
individualcountry analysis. Section seven, present the empirical evidence on economic
reform and
economic growth. Finally, section eight contains our conclusion.
In contrast, this area of research argues that the existence of well-functioning financial

23
intermediaries channelling limited resources from surplus units to deficit units would
provide an efficient allocation of resources, thereby promoting economic growth
(Choong et al., 2003). In this part, there are two views regarding the role of the financial
system and stock market development. Firstly, financial intermediation has a positive
effect on economic growth; that is, the supply-leading view. Secondly, the view of
bidirectional causality between financial development and economic growth.
In an important paper, Levine (1991) constructs an endogenous economic growth
model, associated with the work of Romer (1986, 1990) and Lucas (1988) in which a
stock market emerges to allocate risk and explores how the stock market alters
investment incentives in ways that change steady state growth rates. He explained the
role of the stock market in economic growth
King and Levine (1993) provide the starting point in the empirical research on the
relationship between finance and economic growth. They study four financial indicators
(the size of the financial intermediary sector relative to GDP, the importance of banks
relative to the central bank, the percentage of credit allocated to private firms out of total
credit, and the ratio of credit issued to private firms to GDP) and the growth indicators
(real per capita GDP growth, the rate of physical capital accumulation, and the ratio of
domestic investment to GDP).
The empirical results of this paper show that the indicators of financial development are
strongly and robustly correlated with economic growth indicators, using cross-country
analyses for 77 countries over the period 1960-1989.
Further evidence of the positive effect of stock market development in the economy
came from the study of Atje and Jovanovic (1993). They use cross-sectional data of 39
countries over the period 1980-1988. The empirical results provide strong evidence that
stock market development has a significant effect on subsequent economic growth.

24
 CHAPTER V

COMPANY PROFILE

25
 INTRODUCTION TO THE COMPANY
About Us
The Indiabulls Group is a diversified financial services group with interests in housing
finance, consumer finance and personal wealth. The Group also has a presence in Real
Estate, Pharmaceuticals, Lighting and Infrastructure & Construction Equipment Leasing.
The group has a net worth of more than ₹ 28,580 Cr. (as on 31st March, 2022).

The Group emphasizes a strong focus on technology and customer-centricity, ensuring

that all its companies are in line with the Group principle of – On For Tomorrow. All its
products and offerings are designed and created to ensure that convenience and simplicity
is the primary experience for customers. In addition to providing customers with superior
experiences, the Group‟s companies adhere to strong standards, ensuring that all efforts
are made in a feasible and sustainable push for long term profitability.

Amongst its leading companies, the Group‟s flagship company, Indiabulls Housing
Finance, is rated AA by leading rating agencies including CRISIL & CARE and
Indiabulls Real Estate is a premium real estate developer engaged in building quality
landmark projects. All the Group‟s companies are run independently and are listed in the
Bombay Stock Exchange and the National Stock Exchange.

Other main listed companies:

 Indiabulls Housing Finance Ltd. (IBHFL) is India´s 3rd largest Housing

Finance Company (HFC). The company is registered as a Housing Finance
Company (HFC) and is regulated by the National Housing Bank (NHB). IBHFL
is a leading provider of home loans, loan against properties and commercial
vehicle loans.
The company has a loan asset book of over Rs. 34,400 Cr and has, since
inception, disbursed over Rs. 71,000 Cr to over 5.5 lakh customers. With a net
worth of over Rs. 5,300 Cr, IHFL is one of the best capitalized companies
amongst its peer with a CRAR of 18.47% as at March 31st, 2013. Further, the
company is one of the least levered amongst its peer set with a net debt-to-equity
ratio of only 4.67. The company enjoys a credit rating of AA+.
IBHFL has 200 well appointed and customer accessible walk-in branches spread
across the country. Company’s national and International reach is further
enhanced from tie-ups with Yes Bank and Doha Bank

26
  Indiabulls Real Estate (IBREL) is among India's top Real Estate companies
with development projects spread across residential complexes, integrated
townships, commercial office complexes, hotels, malls, Special Economic Zones
(SEZs) and infrastructure development. Indiabulls Real Estate partnered with
Farallon Capital Management LLC of USA to bring the first FDI into real estate
in the country. The company has a networth of Rs 7,403 Crore and has purchased
prime land, mostly in the metros and other Tier 1 cities worth Rs 4,000 Crore in
government auctions alone. Indiabulls Real Estate is currently developing 71.55
million sqft into premium quality, high-end commercial, residential and retail
spaces. The company has been assigned 'A+' rating.

 Indiabulls Power (IBPOW) is currently developing Thermal Power Projects

with an aggregate capacity of 5400 MW. The first unit is expected to go on stream
in May 2012. The net worth of Indiabulls Power is Rs 5,507 Crore. The company
has a total capital expenditure of Rs 27,500 Crore. The company has been
assigned 'BBB' rating.

INDIABULLS GROUP
Indiabulls Group has several companies with presence in Housing Finance, Real Estate,
Securities. All the group companies are listed on the Bombay Stock Exchange, and
the National Stock Exchange. The combined market capitalization of these companies is
15,443 Crore.[1] Indiabulls was conferred the status of a Business Superbrand by The
Brand Council, Superbrands India in 2008.

INDIABULLS HOUSING FINANCE LIMITED

Indiabulls Housing Finance Ltd (IBHFL) was incorporated in May 2005, registered as a
Housing Finance Company and is regulated by National Housing Bank. The company
has a loan book of over Rs 41,169 Crore (US$6.86 bn). It has till date cumulatively
disbursed loans of over Rs 86,300 Crore (US$14.38 bn)

27
INDIABULLS REAL ESTATE LIMITED (IBREL)
Indiabulls Real Estate Limited was incorporated in the year 2005 and is the Group's Real
Estate arm with focus on Construction and Development of properties, Project
Management, and Construction Services. IBREL was demerged from Indiabulls
Financial Services Limited in the year 2006.

INDIABULLS SECURITIES LIMITED

Indiabulls Securities Limited is an Indian Capital Markets company. It provides services
like Securities Broking, Advisory, Depository and Equity Research services. [6] These
services are provided both through on-line and off-line distribution channels. Its in-house
trading platform is called "Power Indiabulls".

OTHER ALLEGATIONS
Two officials of Indiabulls Securities Limited were booked by the police on allegations
of fraud in May 2004. The victim alleged that despite giving the company business worth
INR 200 million, the company had not issued any certificate or document to him showing
that he was an associate.

28
 Awards and Accolades
Ranked 20th among India’s Best Companies to Work For 2021
A study by Economic Times & Great Place to Work

India’s Best Workplaces in BFSI-2021

By Great Place to Work

India’s Best Workplaces in NBFC- 2021

By Great Place to Work

Best Social Media Brand in the BFSI sector (Financial Services)

At the SAMMIE 2018

Awards for Annual Report, Brand Film and Table Calendar 2017-18
At the 8th Annual Corporate Collateral Awards 2018 by PRCI

Award for ‘Gold Level – Arogya World Healthy Workplace’

At the „Arogya World Healthy Workplace Conference & Awards‟

Award for 'Excellence in Cost Management'

At the „14th National Awards for Excellence in Cost Management 2016‟

SKOCH Order-of-Merit Award (Housing Finance)

At the 48th SKOCH Summit 2017

29
 CHAPTER VI
DATA ANALYSIS &
INTERPRETATION

30
METHODOLOGY

Arithmetic average or mean:

The arithmetic average measures the central tendency. The purpose of computing
an average value for a set of observations is to obtain a single value, which is
representative of all the items. The main objective of averaging is to arrive at a single
value which is a representative of the characteristics of the entire mass of data and
arithmetic average or mean of a series (usually denoted by x) is the value obtained by
dividing the sum of the values of various items in a series (sigma x) divided by the
number of items (N) constituting the series.
Thus, if X1, X2......................Xn are the given N observations. Then

X= X1+X2+.............Xn
N
RETURN

Current price-previous price *100

Previous price

STANDARD DEVIATION:

The concept of standard deviation was first suggested by Karl Pearson in 1983.it

may be defined as the positive square root of the arithmetic mean of the squares of

deviations of the given observations from their arithmetic mean. In short S.D may be

defined as “Root Mean Square Deviation from Mean”

It is by far the most important and widely used measure of studying dispersions.

For a set of N observations X1, X2..........Xn with mean X,

Deviations from Mean: (X1-X), (X2-X),….(Xn-X)

Mean-square deviations from Mean:

= 1/N (X1-X) 2+(X2-X) 2+………. + (Xn-X) 2

31
 =1/N sigma(X-X) 2

Root-mean-square deviation from meantime.

VARIANCE:

The square of standard deviation is known as Variance.

Variance is the square root of the standard deviation:

Variance = (S.D) 2

Where, (S.D) is standard deviation

CORRELATION

Correlation is a statistical technique, which measures and analyses the degree or

extent to which two or more variables fluctuate with reference to one another. Correlation
thus denotes the inter-dependence amongst variables. The degrees are expressed by a
coefficient, which ranges between –1 and +1. The direction of change is indicated by (+)
or (-) signs. The former refers to a sympathetic movement in a same direction and the
later in the opposite direction.

Karl Pearson‟s method of calculating coefficient (r) is based on covariance of the

concerned variables. It was devised by Karl Pearson a great British Biometrician.

This measure known as Pearson an correlation coefficient between two variables

(series) X and Y usually denoted by „r‟ is a numerical measure of linear relationship and
is defined as the ratio of the covariance between X and Y (written as Cov(X,Y) to the
product of standard deviation of X and Y

32
Symbolically

r = Cov (X, Y)

SD of X, Y

= Σ xy/N = ΣXY

SD of X, Y N

Where x =X-X, y=Y-Y

Σxy = sum of the product of deviations in X and Y series calculated with reference to
their arithmetic means.
X = standard deviation of the series X.
Y = standard deviation of the series Y

33
DATA ANALYSIS:

ARBITRAGE PRICE DIFFERENCE BETWEEN BSE AND NSE FOR THE

MONTH OF JAN - 2022

Close Price Close Price

S.no Date Difference
BSE NSE
1 3-Jan-22 764.75 764.7 0.05
2 4-Jan-22 772.9 772.85 0.05
3 5-Jan-22 787.6 788.05 -0.45
4 6-Jan-22 785.05 785.05 0
5 7-Jan-22 793.35 793.25 0.1
6 10-Jan-22 810.5 810.75 -0.25
7 11-Jan-22 810.45 810.65 -0.2
8 12-Jan-22 824.1 823.75 0.35
9 13-Jan-22 824.4 824.7 -0.3
10 14-Jan-22 820.2 820 0.2
11 17-Jan-22 819.4 819.3 0.1
12 18-Jan-22 823.35 823.1 0.25
13 19-Jan-22 808.35 808.6 -0.25
14 20-Jan-22 809.95 810.25 -0.3
15 21-Jan-22 804.6 804.5 0.1
16 24-Jan-22 798.2 798.45 -0.25
17 25-Jan-22 801.55 801.65 -0.1
18 27-Jan-22 794 794.65 -0.65
19 28-Jan-22 781.1 781.15 -0.05
20 31-Jan-22 789.25 788.8 0.45

SUMMARY OF STATISTICS

Mean -0.0575
Max 0.45
Min -0.45
Maxprice 824.7
min price 764.7

34
 GRAPHICAL REPRESENTATION

INTERPRETATION:

The above table and graph represents arbitrage pricing analysis of ICICI
BANK stock trading in BSE and NSE. Here arbitrage price difference of ICICI BANK
stock can be got by subtracting NSE from BSE. In the month of JAN-2022 ICICI BANK
stock consists minimum value is -0.45 and maximum value 0.45 and Mean is -0.0575.
The above differences can shows that there is no scope for arbitrage as profit exists below
five percent.

35
ARBITRAGE PRICE DIFFERENCE BETWEEN BSE AND NSE FOR THE
MONTH OF FEB - 2022

Close price Close price

S.no Date Difference
bse NSE
1 1-Feb-22 809.9 810.3 -0.4
2 2-Feb-22 813.8 813.75 0.05
3 3-Feb-22 808.85 808.95 -0.1
4 4-Feb-22 804.95 805.05 -0.1
5 7-Feb-22 786.35 786.4 -0.05
6 8-Feb-22 792.7 792.5 0.2
7 9-Feb-22 802.7 802.8 -0.1
8 10-Feb-22 805.25 805.5 -0.25
9 11-Feb-22 791.05 790.8 0.25
10 14-Feb-22 753.65 753.7 -0.05
11 15-Feb-22 776.15 776.05 0.1
12 16-Feb-22 765.35 764.05 1.3
13 17-Feb-22 750.05 750.35 -0.3
14 18-Feb-22 749.55 748.9 0.65
15 21-Feb-22 754.3 754.45 -0.15
16 22-Feb-22 751.4 751.3 0.1
17 23-Feb-22 744.7 744.6 0.1
18 24-Feb-22 707.25 707.4 -0.15
19 25-Feb-22 730.45 730.05 0.4
20 28-Feb-22 742.45 742.7 -0.25

SUMMARY OF STATISTICS

mean 0.0625
max 1.3
min -0.25
maxprice 813.75
min price 707.4

36
 GRAPHICAL REPRESENTATION

INTERPRETATION:
The above table and graph represents arbitrage pricing analysis of ICICI
BANK stock trading in BSE and NSE. Here arbitrage price difference of ICICI BANK
stock can be got by subtracting NSE from BSE. In the month of FEB-2022 ICICI BANK
stock consists minimum value is -0.25 and maximum value 1.3and Mean is 0.0625. The
above differences can shows that there is no scope for arbitrage as profit exists below five
percent.

37
ARBITRAGE PRICE DIFFERENCE BETWEEN BSE AND NSE FOR THE
MONTH OF JAN - 2022

Close Close
S. no Date Difference
Price BSE Price NSE
1 3-Jan-22 1519.7 1519.65 0.05
2 4-Jan-22 1528.4 1528.55 -0.15
3 5-Jan-22 1564.65 1564.85 -0.2
4 6-Jan-22 1539.9 1539.75 0.15
5 7-Jan-22 1550.4 1550.55 -0.15
6 10-Jan-22 1558.85 1559.15 -0.3
7 11-Jan-22 1565.7 1565.9 -0.2
8 12-Jan-22 1556.55 1556.65 -0.1
9 13-Jan-22 1528.35 1528 0.35
10 14-Jan-22 1545.25 1545.15 0.1
11 17-Jan-22 1521.55 1521.5 0.05
12 18-Jan-22 1529.6 1529.25 0.35
13 19-Jan-22 1518.55 1518.45 0.1
14 20-Jan-22 1509.7 1509 0.7
15 21-Jan-22 1520.7 1521.6 -0.9
16 24-Jan-22 1487.45 1486.65 0.8
17 25-Jan-22 1487.25 1488.05 -0.8
18 27-Jan-22 1476.3 1474.95 1.35
19 28-Jan-22 1463.3 1463.25 0.05
20 31-Jan-22 1485.55 1485.7 -0.15

SUMMARY OF STATISTICS

mean 0.055
max 1.35
min -0.15
maxprice 1565.9
min price 1463.25

38
 GRAPHICAL REPRESENTATION

INTERPRETATION:

The above table and graph represents arbitrage pricing analysis of HDFC BANK
stock trading in BSE and NSE. Here arbitrage price difference of HDFC BANK stock
can be got by subtracting NSE from BSE. In the month of JAN-2022 HDFC BANK stock
consists minimum value is -0.15 and maximum value 1.35 and Mean is 0.055. The above
differences can shows that there is no scope for arbitrage as profit exists below five
percent.

39
ARBITRAGE PRICE DIFFERENCE BETWEEN BSE AND NSE FOR THE
MONTH OF FEB - 2022

Close
S.no Date Close Price NSE Difference
Price
BSE
1 1-Feb-22 1498.4 1497 1.4
2 2-Feb-22 1531.2 1531.2 0
3 3-Feb-22 1514.35 1515.35 -1
4 4-Feb-22 1524.25 1524 0.25
5 7-Feb-22 1468.6 1468.15 0.45
6 8-Feb-22 1461.1 1461.85 -0.75
7 9-Feb-22 1497.7 1497.6 0.1
8 10-Feb-22 1524.15 1525.1 -0.95
9 11-Feb-22 1518.85 1518.85 0
10 14-Feb-22 1473.05 1473.7 -0.65
11 15-Feb-22 1518.2 1517.8 0.4
12 16-Feb-22 1516.05 1515.75 0.3
13 17-Feb-22 1506.3 1506.5 -0.2
14 18-Feb-22 1512.65 1512.35 0.3
15 21-Feb-22 1521.75 1522.1 -0.35
16 22-Feb-22 1511.45 1510.7 0.75
17 23-Feb-22 1501.9 1500.9 1
18 24-Feb-22 1419.6 1419.4 0.2
19 25-Feb-22 1455.65 1456.1 -0.45
20 28-Feb-22 1426.7 1426.25 0.45

SUMMARY OF STATISTICS

mean 0.0625
max 1.4

min -1

maxprice 1531.2
min price 1419.4

40
 GRAPHICAL REPRESENTATION

INTERPRETATION

The above table and graph represents arbitrage pricing analysis of HDFC BANK
stock trading in BSE and NSE. Here arbitrage price difference of HDFC BANK stock
can be got by subtracting NSE from BSE. In the month of FEB-2022 HDFC BANK
stock consists minimum value is -1 and maximum value 1.4 and Mean is 0.0625. The
above differences can shows that there is no scope for arbitrage as profit exists below five
percent.

41
ARBITRAGE PRICE DIFFERENCE BETWEEN BSE AND NSE FOR THE
MONTH OF JAN - 2022

Close Price Close Price

S.no Date Difference
BSE NSE
1 3-Jan-22 3818.15 3817.75 0.4
2 4-Jan-22 3882.7 3884.75 -2.05
3 5-Jan-22 3861.05 3860.95 0.1
4 6-Jan-22 3806.85 3807.45 -0.6
5 7-Jan-22 3854.85 3853.5 1.35
6 10-Jan-22 3879.35 3879.85 -0.5
7 11-Jan-22 3915.8 3915.9 -0.1
8 12-Jan-22 3857.25 3859.9 -2.65
9 13-Jan-22 3897.65 3897.9 -0.25
10 14-Jan-22 3969.25 3968.15 1.1
11 17-Jan-22 4019.1 4019.15 -0.05
12 18-Jan-22 3990.25 3990.6 -0.35
13 19-Jan-22 3915.8 3914.65 1.15
14 20-Jan-22 3827.85 3826.55 1.3
15 21-Jan-22 3834.85 3833.5 1.35
16 24-Jan-22 3771.5 3771.35 0.15
17 25-Jan-22 3770.1 3769.9 0.2
18 27-Jan-22 3650.1 3649.25 0.85
19 28-Jan-22 3690.25 3690.05 0.2
20 31-Jan-22 3737.9 3736.25 1.65

SUMMARY OF STATISTICS

mean 0.1625
max 1.65
min -2.65
Maxprice 4019.15
min price 3649.25

42
 GRAPHICAL REPRESENTATION

INTERPRETATION:

The above table and graph represents arbitrage pricing analysis of TCS stock
trading in BSE and NSE. Here arbitrage price difference of TCS stock can be got by
subtracting NSE from BS. In the month of JAN-2022 TCS stock consists minimum
value is -2.65and maximum value 1.65 and Mean is 0.1625. The above differences can
shows that there is no scope for arbitrage as profit exists below five percent.

43
ARBITRAGE PRICE DIFFERENCE BETWEEN BSE AND NSE FOR THE
MONTH OF FEB - 2022

Close Close Price

S.no Date Difference
Price BSE NSE
1 1-Feb-22 3800.65 3800.65 0
2 2-Feb-22 3857 3856.2 0.8
3 3-Feb-22 3825 3824.6 0.4
4 4-Feb-22 3814.65 3814.9 -0.25
5 7-Feb-22 3778.6 3779 -0.4
6 8-Feb-22 3742.4 3743.45 -1.05
7 9-Feb-22 3761.25 3760.55 0.7
8 10-Feb-22 3771.2 3770.35 0.85
9 11-Feb-22 3695.6 3694.95 0.65
10 14-Feb-22 3734.25 3733.75 0.5
11 15-Feb-22 3817.7 3817.8 -0.1
12 16-Feb-22 3813.55 3813.1 0.45
13 17-Feb-22 3784.45 3784.2 0.25
14 18-Feb-22 3794.8 3793.9 0.9
15 21-Feb-22 3720.25 3719.4 0.85
16 22-Feb-22 3586.65 3586.4 0.25
17 23-Feb-22 3565.3 3563.8 1.5
18 24-Feb-22 3402.25 3401.65 0.6
19 25-Feb-22 3519.7 3520.75 -1.05
20 28-Feb-22 3554.55 3554.2 0.35

SUMMARY OF STATISTICS

mean 0.31
max 1.5
min -1.05
maxprice 3856.2
min price 3401.65

44
 GRAPHICAL REPRESENTATION

INTERPRETATION:

The above table and graph represents arbitrage pricing analysis of TCS stock
trading in BSE and NSE. Here arbitrage price difference of TCS stock can be got by
subtracting NSE from BSE. In the month of FEB-2022 TCS stock consists minimum
value is -1.05 and maximum value 1.5 and Mean is 0.31. The above differences can
shows that there is no scope for arbitrage as profit exists below five percent.

45
ARBITRAGE PRICE DIFFERENCE BETWEEN BSE AND NSE FOR THE
MONTH OF JAN - 2022

Close Price Close Price

S.no Date Difference
BSE NSE
1 3-Jan-22 470.85 470.8 0.05
2 4-Jan-22 483.5 483.5 0
3 5-Jan-22 492.2 492.4 -0.2
4 6-Jan-22 491.75 491.7 0.05
5 7-Jan-22 491.3 491.25 0.05
6 10-Jan-22 503.55 503.65 -0.1
7 11-Jan-22 505.95 505.95 0
8 12-Jan-22 510.15 510.25 -0.1
9 13-Jan-22 511.3 511.35 -0.05
10 14-Jan-22 508.25 508.35 -0.1
11 17-Jan-22 514.05 514 0.05
12 18-Jan-22 506.65 506.8 -0.15
13 19-Jan-22 515.9 515.8 0.1
14 20-Jan-22 511.55 511.4 0.15
15 21-Jan-22 502.8 502.7 0.1
16 24-Jan-22 494.1 494.15 -0.05
17 25-Jan-22 514.85 514.65 0.2
18 27-Jan-22 529 528.95 0.05
19 28-Jan-22 523.35 523.45 -0.1
20 31-Jan-22 538.35 538.3 0.05

SUMMARY OF STATISTICS

mean 5.68
max 0.2
min -0.2
maxprice 538.3
min price 470.8

46
 GRAPHICAL REPRESENTATION

INTERPRETATION:

The above table and graph represents arbitrage pricing analysis of SBI
stock trading in BSE and NSE. Here arbitrage price difference of SBI stock can be got by
subtracting NSE from BSE. In the month of JAN-2022 SBI stock consists minimum
value is -0.2 and maximum value 0.2 and Mean is 5.68. The above differences can shows
that there is no scope for arbitrage as profit exists below five percent.

47
ARBITRAGE PRICE DIFFERENCE BETWEEN BSE AND NSE FOR THE
MONTH OF FEB – 2022

Close Price
S.no Date Close Price NSE Difference
BSE
1 1-Feb-22 532.25 532.3 -0.05
2 2-Feb-22 539.85 539.8 0.05
3 3-Feb-22 540.1 540.1 0
4 4-Feb-22 530.2 530.3 -0.1
5 7-Feb-22 533.2 533.25 -0.05
6 8-Feb-22 531.1 531.35 -0.25
7 9-Feb-22 535.15 535.25 -0.1
8 10-Feb-22 540.45 540.55 -0.1
9 11-Feb-22 529.3 529.6 -0.3
10 14-Feb-22 501.8 501.4 0.4
11 15-Feb-22 524.65 524.8 -0.15
12 16-Feb-22 516.35 516.7 -0.35
13 17-Feb-22 512.8 512.95 -0.15
14 18-Feb-22 515.45 515.3 0.15
15 21-Feb-22 511.85 511.85 0
16 22-Feb-22 498.2 498.4 -0.2
17 23-Feb-22 498.55 498.7 -0.15
18 24-Feb-22 472.65 472.65 0
19 25-Feb-22 482.85 482.95 -0.1
20 28-Feb-22 483.3 483.2 0.1

SUMMARY OF STATISTICS

mean -0.0675
max 0.15
min -0.35
maxprice 540.55
min price 472.65

48
 GRAPHICAL REPRESENTATION

INTERPRETATION:

The above table and graph represents arbitrage pricing analysis of SBI stock
trading in BSE and NSE. Here arbitrage price difference of SBI stock can be got by
subtracting NSE from BSE. In the month of FEB-2022 SBI stock consists minimum
value is -0.35and maximum value 0.15 and Mean is -0.0675. The above differences can
shows that there is no scope for arbitrage as profit exists below five percent.

49
ARBITRAGE PRICE DIFFERENCE BETWEEN BSE AND NSE FOR THE
MONTH OF JAN - 2022

Close Price Close Price

S.no Date Difference
BSE NSE
1 3-Jan-22 718.6 718.7 -0.1
2 4-Jan-22 721.55 721.5 0.05
3 5-Jan-22 713.4 713.5 -0.1
4 6-Jan-22 705.65 705.75 -0.1
5 7-Jan-22 711.2 711.5 -0.3
6 10-Jan-22 693.65 693.5 0.15
7 11-Jan-22 694.1 694.15 -0.05
8 12-Jan-22 691.35 691.35 0
9 13-Jan-22 649.85 649.75 0.1
10 14-Jan-22 639.8 639.8 0
11 17-Jan-22 646.2 646.65 -0.45
12 18-Jan-22 633.4 633.3 0.1
13 19-Jan-22 621.3 621.15 0.15
14 20-Jan-22 615.35 615.2 0.15
15 21-Jan-22 605.2 605.05 0.15
16 24-Jan-22 572.85 572.75 0.1
17 25-Jan-22 562.85 562.7 0.15
18 27-Jan-22 544.75 544.75 0
19 28-Jan-22 552.2 552.15 0.05
20 31-Jan-22 572.65 572.6 0.05

SUMMARY OF STATISTICS

mean 0.005
max 0.15
Min -0.45
maxprice 721.5
min price 544.75

50
 GRAPHICAL REPRESENTATION

INTERPRETATION:

The above table and graph represents arbitrage pricing analysis of

WIPRO stock trading in BSE and NSE.Here arbitrage price difference of WIPRO stock
can be got by subtracting NSE from BSE.In the month of JAN-2022 WIPRO stock
consists minimum value is -0.45and maximum value 0.15 and Mean is 0.005. The above
differences can shows that there is no scope for arbitrage as profit exists below five
percent.

51
ARBITRAGE PRICE DIFFERENCE BETWEEN BSE AND NSE FOR THE
MONTH OF FEB - 2022

Close Price Close Price

S.no Date Difference
BSE NSE
1 1-Feb-22 576.8 576.65 0.15
2 2-Feb-22 588.15 588 0.15
3 3-Feb-22 578.35 578.25 0.1
4 4-Feb-22 571.85 571.75 0.1
5 7-Feb-22 557.2 557 0.2
6 8-Feb-22 560 560.25 -0.25
7 9-Feb-22 569.1 568.95 0.15
8 10-Feb-22 573.5 573.65 -0.15
9 11-Feb-22 561.65 561.45 0.2
10 14-Feb-22 541.9 541.7 0.2
11 15-Feb-22 563.45 563.35 0.1
12 16-Feb-22 564.25 563.9 0.35
13 17-Feb-22 564.85 564.9 -0.05
14 18-Feb-22 562.5 562.45 0.05
15 21-Feb-22 570.65 570.8 -0.15
16 22-Feb-22 564.1 564.15 -0.05
17 23-Feb-22 567.4 567.1 0.3
18 24-Feb-22 536.85 537.15 -0.3
19 25-Feb-22 555.3 555.25 0.05
20 28-Feb-22 555.85 555.8 0.05

SUMMARY OF STATISTICS

mean 0.06
max 0.35
min 0.25
maxprice 588
min price 537.15

52
 GRAPHICAL REPRESENTATION

INTERPRETATION:

The above table and graph represents arbitrage pricing analysis of

WIPRO stock trading in BSE and NSE.Here arbitrage price difference of WIPRO stock
can be got by subtracting NSE from BSE.In the month of FEB-2022 WIPRO stock
consists minimum value is 0.25 and maximum value 0.35and Mean is 0.06. The above
differences can shows that there is no scope for arbitrage as profit exists below five
percent.

53
 CHAPTER VII
RESEARCH FINDINGS
& SUGGESTIONS

54
 FINDINGS OF THE STUDY
 The above table and graph represents arbitrage pricing analysis of ICICI BANK stock
trading in BSE and NSE. Here arbitrage price difference of ICICI BANK stock can
be got by subtracting NSE from BSE. In the month of JAN-2022 ICICI BANK stock
consists minimum value is -0.45 and maximum value 0.45 and Mean is -0.0575. The
above differences can shows that there is no scope for arbitrage as profit exists below
five percent.
 The above table and graph represents arbitrage pricing analysis of ICICI BANK stock
trading in BSE and NSE. Here arbitrage price difference of ICICI BANK stock can
be got by subtracting NSE from BSE. In the month of FEB-2022 ICICI BANK stock
consists minimum value is -0.25 and maximum value 1.3and Mean is 0.0625. The
above differences can shows that there is no scope for arbitrage as profit exists below
five percent.
 The above table and graph represents arbitrage pricing analysis of HDFC BANK
stock trading in BSE and NSE. Here arbitrage price difference of HDFC BANK
stock can be got by subtracting NSE from BSE. In the month of JAN-2022 HDFC
BANK stock consists minimum value is -0.15 and maximum value 1.35 and Mean is
0.055. The above differences can shows that there is no scope for arbitrage as profit
exists below five percent.
 The above table and graph represents arbitrage pricing analysis of HDFC BANK
stock trading in BSE and NSE. Here arbitrage price difference of HDFC BANK
stock can be got by subtracting NSE from BSE. In the month of FEB-2022 HDFC
BANK stock consists minimum value is -1 and maximum value 1.4 and Mean is
0.0625. The above differences can shows that there is no scope for arbitrage as profit
exists below five percent.
 The above table and graph represents arbitrage pricing analysis of TCS stock
trading in BSE and NSE. Here arbitrage price difference of TCS stock can be got
by subtracting NSE from BS. In the month of JAN-2022 TCS stock consists
minimum value is -2.65and maximum value 1.65 and Mean is 0.1625. The above
differences can shows that there is no scope for arbitrage as profit exists below five
percent.
 The above table and graph represents arbitrage pricing analysis of TCS stock
trading in BSE and NSE. Here arbitrage price difference of TCS stock can be got by

55
 subtracting NSE from BSE. In the month of FEB-2022 TCS stock consists minimum
value is -1.05 and maximum value 1.5 and Mean is 0.31. The above differences can
shows that there is no scope for arbitrage as profit exists below five percent.
 The above table and graph represents arbitrage pricing analysis of SBI stock trading
in BSE and NSE. Here arbitrage price difference of SBI stock can be got by
subtracting NSE from BSE. In the month of JAN-2022 SBI stock consists minimum
value is -0.2 and maximum value 0.2 and Mean is 5.68. The above differences can
shows that there is no scope for arbitrage as profit exists below five percent.
 The above table and graph represents arbitrage pricing analysis of SBI stock trading
in BSE and NSE. Here arbitrage price difference of SBI stock can be got by
subtracting NSE from BSE. In the month of FEB-2022 SBI stock consists minimum
value is -0.35and maximum value 0.15 and Mean is -0.0675. The above differences
can shows that there is no scope for arbitrage as profit exists below five percent.
 The above table and graph represents arbitrage pricing analysis of WIPRO stock
trading in BSE and NSE.Here arbitrage price difference of WIPRO stock can be
got by subtracting NSE from BSE.In the month of JAN-2022 WIPRO stock
consists minimum value is -0.45and maximum value 0.15 and Mean is 0.005. The
above differences can shows that there is no scope for arbitrage as profit exists
below five percent.
 The above table and graph represents arbitrage pricing analysis of WIPRO stock
trading in BSE and NSE.Here arbitrage price difference of WIPRO stock can be
got by subtracting NSE from BSE.In the month of FEB-2022 WIPRO stock
consists minimum value is 0.25 and maximum value 0.35and Mean is 0.06. The
above differences can shows that there is no scope for arbitrage as profit exists
below five percent.

56
 CHAPTER -VIII
SUGGESTIONS &
RECOMMENDATIONS

57
 SUGGESTIONS & RECOMMENDATIONS

 The study shows that none of the studied ten scripts give any scope for arbitration. The
reason is explained below. The scripts are studied for arbitration for a period of two
months “JAN-2022 and FEB-2022”
 ICICI stock prices in JAN-2022 are in the range of rs 1016 and rs 1257, the difference in
prices are rs 6.65 and rs 8.75.The maximum difference is less than 1 percent, so not
beneficial for arbitration purposes.
 ICICI prices in JAN-2022 are in the range of rs 1103 and rs 1333, the difference in prices
are 18.45 and 6.95.The difference is more than 5 percent, so beneficial for arbitration
purposes.
 HDFC stock prices in JAN-2022 are in the range of rs 1357 and rs 1653, the difference in
prices are rs 13.90 and rs 3.15.and in JAN-2022 are in the range of rs 1475 and rs 1770,
the difference in prices are 14.65 and 4.30.The difference is more than 5 percent, so
beneficial for arbitration purposes.
 TCS stock prices in JAN-2022 are in the range of rs 757 and rs 830, the difference in
prices are rs 7.65 and rs 5.60.and in JAN-2022 are in the range of rs 686 and rs 755, the
difference in prices are 4.80 and 4.10.The difference is less than 1 percent, so not
beneficial for arbitration purposes.
 SBI prices in JAN-2022 are in the range of rs 928 and rs 1127, the difference in prices are
10.15 and 5.15.The difference is more than 5 percent, so beneficial for arbitration
purposes
 SBI prices in JAN-2022 are in the range of rs 833 and rs 948, the difference in prices are
4.1 and 3.9.The difference is less than 1 percent, so not beneficial for arbitration purposes

 WIPRO stock prices in JAN-2022 are in the range of rs 454 and rs 511, the difference in
prices are rs 2.65 and rs 2.40.The maximum difference is less than 1 percent, so not
beneficial for arbitration purposes.
 WIPRO prices in JAN-2022 are in the range of rs 436 and rs 499, the difference in prices
are 2.55 and 2.40.The difference is less than 1 percent, so not beneficial for arbitration
purposes.

58
BIBLIOGRAPHY

59
 BIBLIOGRAPHY

BOOKS

Security Analysis & Portfolio Management Fishers & Jordon

Financial Management M.Y. Khan

Financial Management Prasanna Chandra

NEWS PAPERS

BUSINESS LINE

TIMES OF INDIA

MAGAZINES

WEEK

BUSINESS DAILY

ECONOMIC TIMES

WEBSITES

www.amfiindia.com
www.sebi.com
www.Economywatch.com
www.karvy.com
www.moneycontrol.com
www.rbi.org

60