A COMPREHENSIVE PROJECT REPORT ON A study on shareholding pattern and volatility of stock market Submitted to SARDAR PATEL COLLEGE OF ADMINISTRATION

N & MANAGEMENT, BAKROL, ANAND IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE AWARD FOR THE DEGREE OF MASTER OF BUSINESS ASMINISTRATION In Gujarat Technological University UNDER THE GUIDANCE OF Faculty Guide MS. Varshakuchara (Assistance professor) Submitted by HiralpatelVidhithaker Enroll No.:127550592094EnrollNo : 127550592150 MBA SEMESTER III ( 2012-2014)

SARDAR PATEL COLLEGE OF ADMINISTRATION & MANAGEMENT, BAKROL, ANAND MBA PROGRAMME Affiliated to Gujarat Technological University Ahmedabad ,December , 2013
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Introduction of stock market

A stock market is a place where different kinds of securities are traded in the secondary market and in the primary market. The whole stock market is regulated by the SEBI that is security exchange board of India. So the combination of primary and secondary market is called capital market. So, capital market is an important constituent of the financial system. It is a market for long-term-for both equity and debt and fund rose within and outside the country. The capital market aids economic growth by mobilizing the savings of the economic sectors and directing the same towards channels of productive use. This is facilitated through the following measures: Issue of primary securities in the primary market i.e. IPO Issue of the secondary securities in the primary market i.e. FPO Secondary market transaction in outsourcing securities which facilitates liquidity.

The Indian stock market

The Indian stock market today is actually comprised of two key entities and over 20 other exchanges. These 2 primary entities are the Bombay Stock Exchange Limited (BSE) and the National Stock Exchange of India Limited (NSE). There is an interesting past history regarding where the two markets originated from. During the 1850's, the first stock exchange in India was established when the East India Company created and developed a "community" of brokers. By 1860, there were already 60 broker members of the exchange. As of 1874 and the results of a rapidly expanding share trading industry, these brokers gathered regularly (at a well-know locationwhich is now known as Dalal Street) in order to conduct their business. Stockbrokers began gathering in front of Mumbai's Town Hall, conducting there meeting underneath Banyan trees, and the Indian stock market was born. Although there are actually over 20 different stock exchanges in India today, but the two most powerful ones are the two mentioned above. The Bombay
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Stock Exchange Limited oftentimes referred to as the BSE, was originally established in 1875. Interestingly enough, it is the oldest stock market on the entire Asian continent that has been operating since the very beginning. Today there are over 4,700 companies listed on the BSE as well as over 7,700 stock exchange scripts. The National Stock Exchange of India Limited, or NSE as it is called, is an Indian stock market based in the city of Mumbai and was originally established only 18 years ago in 1992. In that short period of time, it has grown to nearly 1,600 company listings and has a current market capitalization of 47, 01,923 Rupees (Wikipedia). It was predicted that the NSE would be the largest stock exchange in India where market capitalization was considered when 2009 ended. Up until the 1980s there were no way to measure or scale the ups and downs in stock values. However, in 1986, the BSE implemented SENSEX, which was a stock index. Three years later, India witnessed the launch of the BSE National Index. It was renamed the BSE-100 Index in October of 1996 because it was comprised of 100 different stocks listed with India's 5 major stock exchanges. These 5 major markets were Ahmadabad, Calcutta, Delhi, Madras, and Mumbai. Additionally, the dollar-linked version of the BSE-100 was launched in May of 2006. Numerous banks, financial intermediaries, insurance companies, and leading financial institutions mutually own the NSE. However, the entities of management and ownership are completely separate entities. Interestingly enough, 2 of the NSE's foreign investors have taken a serious position in the NSE - Goldman Sachs and NYSE Euro next.

 Introduction of the volatility

The year 1991 brings lots to the nation. Mr. P V Narsinhmaro came with the Concept of liberalization, privatization and globalization, and after that the journey of Prosperity start. The economic developments touch two digit growth rates. Our export import breaks all record and climb to new reach. India attracts the highest foreign funds after China. This entire goody picture attracts huge funds from abroad. They start to invest in India and Indian companies. In result, companies get huge & cheap funds. They converted these funds into profit and growth. And finally all these things are reflecting in stock prices of the companies. The journey of Indian stock market starts form February, 2006. In 2006 Sensex kissed 10000 points. And within two years it touches 21000 in December, 2007. The sensex rose from 13000 t0 21000 from January 2007 to December. And within 6 month again it reaches to 7800 from January to October 2008. We can feel high volatility in the Indian stock market. The reasons for this volatility are FIIs inflow, Inflation rate, interest rate, govt. policy, Investors awareness etc. This research mainly focuses on the volatility of BSE SENSEX.

Literature Review
The first study (Khanna&Palepu, 1999) established that there is a positive linear relationship between insider ownership and performance of the firm by using single year (1993) data and both accounting (ROA) and market (Tobins q) based performance measures to study this relationship. According to Jensen and Meckling (1976) cash flow ownership by an entrepreneur reduces incentives for expropriation and raises incentives to pay out dividends. They also (La Porta et al. (1999b)) show that this need for higher cash flow ownership shows a commitment to limit expropriation and is higher in countries with inferior shareholder protection. The nature of relation between the ownership structure and firms economic performance, have been the core issue in the corporate governance literature. From a firms point of view, firms portability, enjoyed by agents, is affected by ownership structure of the firm. In particular, Ownership structure is an incentive device for reducing the agency costs associated with the Separation of ownership and management, which can be used to protect property rights of the firm (Barbosa and Louri (2002)). The dispersion of ownership led to the evolution of the control and the rise of Management as power in the management. The trend showed that a vast Majority of shareholders purchased stock only for the purpose of investment and Were no longer interested in the management of the corporation. The modern Shareholder is in fact a shareholder very often institutional and impersonal and Completely without any loyalty to the company and without any ambition to take Part in the management.Under the modern corporate system, control over the Corporation was being exercised with minimum ownership interest.4 In the Indian context, early study by Thenmozhi (2002) reported decline in volatility due to increased flow of information while Shenbagaraman (2003) did not find significant impact on market volatility in India. Raju and Karnade (2003) also studied the behaviour of volatility of the S&P CNX Nifty index after the introduction of derivatives trading. All the above studies relating to S&P
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Nifty reported a decline in the volatility. Bandivadekar and Ghosh (2003) studied volatility behaviour of both NSE Nifty and BSE Sensex after the introduction of futures trading and documented futures effects in the volatility behavior of NSE Nifty.5 Shareholding pattern & volatility of stock 41. We study the relation between institustional ownership and volatility across dividend paying and non dividend paying firms.we find that institustional ownership and volatility are positively correlated for dividend paying firms,while they are negatively correlated for non dividend paying firms. This study examines empirically the effects of ownership structure on the firm performance For a panel of Indian corporate firms, from an `agency perspective'. We examine the effect of interactions between corporate, foreign, institutional, and managerial ownership on firm Performance. Using panel data framework, we show that a large fraction of cross-sectional Variation, in firm performance, found in several studies, can be explained by unobserved Firm heterogeneity. We also provide some evidence that the shareholding by institutional investors and managers affect firm performance, after controlling for observed firm characteristics and unobserved firm heterogeneity and the effect is non-linear.

Back ground of the study

SHAREHOLDING PATTERN & VOLATILITY OF STOCKgives

complete Review and analysis of shareholding pattern of the various companies included in the SENSEX & the volatility of their various stocks. The initial part of this report contains the brief information about the SENSEX, its stock selection criterias, the information about the free float methodology & how to calculate the free float methodology. The core project areas, which have been focused, are impact of shareholding pattern in to price volatility.

Scope of the study

This share holding pattern gives the idea regarding the liquidity of that company stock. To reduce the managerial opportunism. The main reason for the prominent roie that volatility plays in financial markets is that volatility is that volatility associated with risk and uncertainty, the key attributes in investing, option pricing, and risk management. To proper liquidity of the companys share To reduce the speculation in the stock market. To fulfil the requirement of the SEBI.

Problem statement
A Study on Share holding pattern and volatility of stock market.
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Objective of the study Primary Objective

The main reason for selecting that topic is to find out Is there any relationship between share holding pattern and the volatility of share price?

Secondary Objectives:1.To know about the overview of the Indian stock market.
2. To project the investor behavior about the stock markets & about the share holding pattern. 3. The SEBI guidelines about the share holding pattern.

Research design

As research design expresses both the structure of the research problem and plan of investigation used to obtain empirical evidence on relations of the problems, we have used descriptive Research. The descriptive research is done to provide insights into, and an understanding of, the problem confronting the researcher.

Our descriptive research includes the use of Analysis of Data.

Assumption
Hypothesis is a one kind of assumption that the researcher have to be made before starting to the overall project. The stock with more than 50% promoter stake has not higher volatility.

SOURCES OF INFORMATION: Secondary source: we have visited the BSE website for the information about the various share holding pattern of the 30 companies which is included in the SENSEX in BSE and prepare a one excel sheet which contains all the data regarding the shareholding pattern that contains promoter holding, various public holding and the shares issued to the various custodians and the depository receipts.

Population :
The top companies having various stocks under BSE on 2nd dec,2013 are as follows : Bajaj auto ltd Bhart heavy electrical ltd BhartiAirtel ltd Clipa ltd DLF ltd HDFC ltd Hero Honda motors ltd Hindalco industries ltd Hindustan unilever ltd Hdfc

Limitation of study
Limitations are the limiting lines that restrict the work in some way or other. in this research study there are also some limiting factors , some of them are as under: 1. data collection : the most important constraint in this study is data collection as secondary data was selected for study. secondary data means the data that are already available i.e. they referred top data which are already collected and analysed by someone. 2. Time period : Time period was one of the main factor as only six month was allotted and the topic covered for research having wide scope. So, it was not possible to cover it is in such a short period. 3. Reliability : The data collected in research was secondary data so this gets a question mark on reliability of the data. which is very important factor of this study and conclusion based and derived from this secondary data only. 4. Misrepresentation of data : If the data is misrepresented in earlier time than it will bring mistakes for further report.thus misrepresentation of data can become as limitation.

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Bibliography
http://www.bseindia.com/shareholding/sharehold_search.asp http://www.bseindia.com/stockinfo/stockprc.aspx http://www.moneycontrol.com http://www.bseindia.com/about/introbse.asp http://www.nseindia.com/about

Refrences for literature review:1. Khanna, Tarun and Krishna Palepu (1999). Emerging Market Business
Groups, Concentrated Ownership, Foreign Investors and Corporate.Governance, Randall Morck (ed.), Chicago: University of Chicago Press. Jensen, C. Michael, and William Meckling (1976). Theory of the Firm: Managerial Behavior, 2. Agency Cost, and Capital Structure,Journal of Financial Economics, 3, October, 305-360.

3 .from survey of Shleifer and Vishny (1997) and Megginson and Netter (2001). 4. Compare S.C. Sen, The New Frontiers of Company Law, 21, (Eastern Law House, Calcutta, 1971 5 Bandivadekar, S and SaurabhGhosh, Derivatives and Volatility on Indian Stock Markets, RBIOccasional Papers, Vol.24, No. 3, Winter 2003 6. Also, dividend disbursement is one of the most important factors influencing S&P stock ratings. Firms who do not pay dividends can not receive a rating higher than a B+ (taken from Standard&Poors Publication, Aug 17,2006) 7.Agrawal, A. and C. Knober [1996], Firm performance and mechanisms to control agency problems between managers and shareholders, Journal of Financial and Quantitative Analysis 31, 377, 397

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