INTRODUCTION

 1.1. For the premier Stock Exchange that pioneered the stock broking activity in India, 128 years of experience seems to be a proud milestone. A lot has changed since 1875 when the Bombay Stock Exchange was established. Since then, the country's capital markets have passed through both good and bad periods. The journey in the 20th century has not been an easy one. Till the decade of eighties, there was no scale to measure the ups and downs in the Indian stock market. The Bombay Stock Exchange (BSE), in 1986 came out with a stock index that subsequently became the barometer of the Indian stock market.

                    SENSEX is not only scientifically designed but also based on globally accepted construction and review methodology. The index is widely reported in both domestic and international markets through print as well as electronic media. Due to its wide acceptance amongst the Indian investors; SENSEX is regarded to be the pulse of the Indian stock market. As the oldest index in the country, it provides the time series data over a fairly long period of time .The growth of equity markets in India has been phenomenal in the decade gone by. Right from early nineties the stock market witnessed heightened activity in terms of various bull and bear runs. The SENSEX captured all these events in the most judicial manner. One can identify the booms and busts of the Indian stock market through SENSEX.

  1. Group A, Group B and Group C shares

The BSE trades with the shares which are listed in one or more stock exchanges. The listed shares are generally divided into two categories namely:

  • Group A Shares (specified shares or cleared securities)
  • Group B shares (Non-Specified shares or non-cleared securities)

Group A Shares represent large and well established companies having broad investor base. These shares are actively traded. Naturally these shares attract a lot of speculative multiples. These facilities are not available to the Group B shares. However,

Shares can be moved from group A to Group B and vice versa depending upon the criteria for switching. The BSE has laid down several criteria for shifting the shares from Group b to Group A, such as, an equity base of Rs. 10 crores, a market capitalization of Rs.25-30 crores, a public holding of 35 to 40 per cent, a shareholding population of 15000 to 20000, good dividend paying status etc.

 

                  There is another group of shares called Group C. under this, only odd lots and permitted securities are included. A number of shares less than the market lot is known as the odd lots. A market lot refers to the minimum number of shares of a particular security that must be transacted on a stock exchange. Odd lots have settlement once in a fortnight or once on Saturdays. Permitted securities are those that are not listed on other stock exchanges in India. So they are permitted to be sold in BSE.

1.2. STATEMENT OF THE PROBLEM

“If I have noticed anything over these 60 years on the Dalal Street, it is that people do not succeed in forecasting what’s going to happen to the stock market”                                                                                 -Benjamin graham

                                                          Legendary investor

                  The volatility in the market has been one of the unpredictable issues in BSE. The erratic market behaviour has the effect of discouraging or even driving away the genuine investors from the market. The Indian secondary market has been notorious for speculative excesses. Rampant price manipulation and high volatility are rooted in excessive speculative tendencies. Stockbrokers and market operators in India have considerable political influence and lobbying power. Perhaps for this reason, the governmental attitude has been rather lenient towards speculation. Short-term speculators relish volatility as it provides them opportunities for highly leveraged and, therefore, potentially highly profitable, trading.

                    A distinguished foreign observer, who visited India a few years ago, commented that: “stock markets are just speculative places. . . . rather than very formal, capital raising, efficient mechanism.”

                 These fluctuations in the market have actually disturbed the genuine investors. They are sure that it is not for the new investors to swim. When there are price fluctuations all around, if there is one thing that looks permanent now, is its volatility.

1.3. OBJECTIVE OF THE STUDY

  1. To find out how to trade safely in a highly volatile Sensex.
  2. To analyze what kind of investment is preferred during fluctuations.
  3. To identify the reasons for the SENSEX fluctuations.
  4. To suggest measures for safer investment in a volatile market.

1.4. SIGNIFICANCE OF THE STUDY

                    With each passing year, the noise level in the stock market rises. Television commentators, financial writers, analysts, and market strategists are all overtaking each other to get investors' attention. At the same time, individual investors, immersed in chat rooms and message boards, are exchanging questionable and often misleading tips. Stock prices skyrocket with little reason, then plummet just as quickly, and people who have turned to investing for their children's education and their own retirement become frightened. Sometimes there appears to be no rhyme or reason to the market, only folly.

“All progress is born of inquiry. Doubt is often better than overconfidence, for it leads to inquiry, an inquiry leads to invention”.

1.5. SCOPE OF THE STUDY

                    The aim of the study is to analyze the various theoretical and practical aspects of the investors’ attitude towards SENSEX Fluctuations. The study is done from the view point of the investors in Madurai city.

1.6. METHODOLOGY

                  The present study is an empirical study based on survey method. It makes use of both primary and secondary data. Primary data is collected from the investors and secondary data from the magazines, published journals and the internet sources.

1.6.1. Research design

                 The research design states the conceptual structure within which the research was conducted. It is a plan for a study that is used to ensure that all relevant data are collected in the most economic way. Hence a thoughtfully framed research design ensures accuracy in the data collected. The research design for this study is of descriptive method. In case of the further classification of the descriptive type, single cross sectional design is used.

1.6.2. Sampling design

               It refers to the technique or the procedure the researcher would adopt in selecting items for the sample. The sample design is determined before data are collected.

1.6.2.1. Population

               The study is conducted among the investors who have invested in stock market in Madurai City.

1.6.2.2. Sampling

                The Sample size representing the investors was 50 in Madurai. Convenient sampling was adopted while selecting the sample. Most accessible population members were selected to obtain the required information. A structured questionnaire was used for collecting data from the investors.

1.6.3. Tools used for data collection

             The tools which were used for date collection are the questionnaire, internet, magazines and newspapers.

1.6.4. Data collection

For carrying on the study both primary and secondary data were used.

Primary data

              The primary data are those which are being collected for the first time and thus happen to be original. As it’s a descriptive study the method used here is interview through questionnaires.

Secondary data

              The secondary data are those which have been collected by someone else and which have already been passed through the statistical process. Data were also collected from various other sources like newspaper, magazines and through cyber search.

                                 

1.6.5. Frame work of analysis

               The data which were collected from the respondents are designed in the master table. The data is then edited, coded and tabulated. Statistical tools are used to represent these data. The tools used are pie diagram, bar diagram, line graph, cones.

1.7. LIMITATION OF THE STUDY

      There are certain limitations for this study:

  1. This study is confined to the investors specifically in Madurai city alone.
  2. The result of the study is to change drastically as there are fluctuations in the market.
  3. The data cannot be a representative for a longer period of time or for the entire Indian market.

1.8. CHAPTER SCHEME

Chapter I deals with the Introduction, Statement of problem, Review of Literature, Scope of study, Objectives, Methodology, Sample size, Tools for analysis, Scheme of the Report and Limitations of the study

Chapter II deals with the investment avenues, capital market, primary market, stock exchanges, its role and types of stocks.

Chapter III deals with the Bombay Stock Exchange, Sensex, its calculation methodology and Sensex milestones.

Chapter IV deals with the investors’ opinion and reactions towards Sensex fluctuations.

Chapter V brings out the findings, suggestions and conclusions of the study.

SCOPE FOR INVESTMENT

2.1. INVESTMENT

        Investment is a commitment of funds for earning additional income. In other words, investment is considered the sacrifice of certain present value of money in anticipation of a reward.

        “An investment is a commitment of funds made in expectation of some positive rate of returns. If the investment is properly undertaken, the returns will commensurate with the risk the investor assumes.”

                                                Donald E. Fischer and Ronald J.Jordan

2.2. TYPES OF INVESTMENT

        The term "investment" is used differently in economics and in finance. Economists refer to a real investment (such as a machine or a house), while financial economists refer to a financial asset, such as money that is put into a bank or the market, which may then be used to buy a real asset.

2.2.1. Business Management

        The investment decision (also known as ) is one of the fundamental decisions of business management: managers determine the assets that the business enterprise obtains. These assets may be physical such as buildings or machinery, intangible such as , software, goodwill, or financial. The manager must assess whether the  of the investment to the enterprise is positive; the net present value is calculated using the enterprise's marginal .

2.2.2. Economics

        In , investment is the production per unit time of  which are not consumed but are to be used for future production. Examples include tangibles such as building a  or  and intangibles such as a year of schooling or on-the-job training. In , gross investment I is also a component of  (GDP), given in the formula GDP = C + I + G + NX.I is divided into non-residential investment (such as factories) and residential investment (new houses). "Net" investment deducts  from gross investment. It is the value of the net increase in the capital stock per year.

2.2.3. Finance

        In , investment is buying  or other monetary or paper (financial) assets in the  or , or in fairly  real assets, such as , , or collectibles.  is the method for assessing whether a potential investment is worth its price. Types of financial investments include shares, other , and  including bonds denominated in foreign . These financial assets are then expected to provide income or positive future cash flows, and may increase or decrease in value giving the investor capital gains or losses.        

        

                    Investments are often made indirectly through , such as , , ,  companies, , and . Though their legal and procedural details differ, an intermediary generally makes an investment using money from many individuals, each of whom receives a claim on the intermediary.

2.3. CAPITAL MARKET

          The capital market (securities markets) is the  for , where  and the  can raise long-term funds. The capital market includes the  and the . Financial regulators, such as the , oversee the capital markets in their respective countries to ensure that investors are protected against fraud. The capital markets consist of the , where new issues are distributed to investors, and the , where existing securities are traded.

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2.4. PRIMARY MARKET

        The primary market is that part of the  that deals with the issuance of new . Companies, governments or public sector institutions can obtain  through the sale of a new stock or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new issues to investors is called an  (IPO).

Features of Primary Market

1. This is the market for new long term capital. The primary market is the market where the securities are sold for the first time. Therefore it is also called New Issue Market ...

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