DEFINITIONS AND EXPLANATIONS 1.

SHARES:The bookish meaning of the word share is a unit of the total equity capital of a limited company. For example, if a company has a total equity can be divided capital of 1 lakh; it can be dived into 10,000 units of face value 10. Each unit is referred to as a share. When one buys a share of a particular company, he gets the right to own a part of the companys assets along with voting powers as well. The person or group holding maximum percentage of shares controls the company. Shareholders get returns in the form of dividends and enjoy the growth of the company in long term with the appreciation in the value of the shares that they hold. If the company does well in its business, the investor may receive periodic dividends and may be in a position to sell his shares at a profit. If the company does poorly, the shares price may fall and the investor could lose. Types of shares: Equity shares Preference shares

2. INVESTMENT: Investment essentially refers to what one does with his savings in order to preserve them and make them grow or yield an income. If one keeps his savings in the form of cash, they are certainly going to diminish in value because the purchasing power of money is constantly going down as a result of inflation. Therefore, if one wants to maintain or increase the value of his savings, he has to keep them in forms other than cash. This is what investment is all about, deployment of savings with the intentions of preserving or increasing their value. This deployment can be done by using savings to buy land, residential properties, commercial properties, gold, jewellery, works of art, fixed deposits in banks and companies, shares, bonds, in fact, anything whose value is likely to either remain constant or appreciate with time. Investment also refers to using one's savings with the intention of earning an income. Need for investment: Hedge against the increasing cost of living. Provisioning against unexpected expenditure in the future. To meet specific ambitions in life. To make savings productive.

3. DEMAT A/C:On doing an online business ever customer has to open and demat account in any bank whichever he likes. Demat account is the account in which the trading done by the customer is mentioned. If the customer sales or purchases any share the details of this sale and purchasing are in demat account. This account contents the name of the shares and also the number of shares held or sold and also the rate of the share with this demat account. It is also compulsory for every customer to open a saving account in the bank because the amount which is to be received when the customers sales the shares are transferred from the demat account to the saving account. It is the responsibility of the customers that the share which he purchased or sales are properly transferred in demat account from the stock exchange whichever he deals. The amount of dividend whichever to be received on the shares when held for one or more year are also transferred in this demat account. It is compulsory for every customer to have a PAN for opening a demat account. If PAN is not there is no chance for the customer to do any trading on line. There is no limit of amount to deal in this account. 4. SENSEX:When the shares are issued to the public the stock exchange gives a particular group to the company. For ex. The ABC Group is given the group A like this there are several companies which fall in A Group. The weightage mean is calculated according to its equity when all the companies of Group A has calculated this weightage mean they are added all together when this addition is done the result which comes down is known as Sensex. The trading of shares of A group totally depends on this Sensex value. When the price of the share raises this Sensex value also rises and when the price of this share comes down the Sensex value also comes down.

5. BEAR MARKET:A market in which stock prices are falling.

6. BID:The highest price a buyer is willing to pay for a stock. When combined with the ask price information, it forms the basis of a stock quote.

7. BROKER OR BROKERAGE FIRM:A securities firm or a registered investment advisor affiliated with a firm. Brokers are the link between investors and the stock market. When acting as a broker for the purchase or sale of listed stock, the investment advisor does not own the securities but acts as an agent for the buyer and seller and charges a commission for these services. 8. BULL MARKET:A share market in which stock prices are rising 9. BEAR MARKET:A share market in which stock prices is falling. 10. CHICKEN MARKET:A share market which is neither bullish nor bearish 11. CAPITAL STOCK:All shares representing ownership of a company, including preferred and common shares. 12. CERTIFICATE:The physical document that shows ownership of a bond, stock or other security 13. EQUITY SHARES OR COMMON SHARES:Shares that represent partial ownership in a company and that which generally carry voting privileges are called as equity shares. Common shareholders may be paid dividends, but only after preferred shareholders are paid. Common shareholders are last in line after creditors, debt holders and preferred shareholders to claim any of a company's assets in the event of liquidation. 14. DEBENTURE:A long-term debt instrument issued by corporations or governments that are backed only by the integrity of the borrower, and not by collateral is called as debenture. It is unsecured and subordinate to secured debt. A debenture is unsecured in that there are no liens or pledges on specific assets.

15. DIVIDEND:The portion of the issuer's equity paid directly to shareholders. It is generally paid on common or preferred shares. The issuer or its representative provides the amount, frequency (monthly, quarterly, semi-annually, or annually), payable date, and record date. An issuer is under no legal obligation to pay either preferred or common dividends. 16. EQUITY PRICE:The price per share traded. 17. EQUITY VALUE:The total dollar value of volume traded on one side of the transaction for a specified period. It equals price multiplied by volume. 18. EQUITY VOLUME:The total number of shares traded on one side of the transaction. 19. HEDGE:A strategy used to limit investment loss by making a transaction that offsets an existing position. 20. INITIAL PUBLIC OFFERING (IPO):A company's first issue of shares to the general public. 21. LISTED STOCK:Shares of an issuer that are traded on a stock exchange. Issuers pay fees to the exchange to be listed and must abide by the rules and regulations set out by the exchange to maintain listing privileges. 22. LISTING APPLICATION:The document that an issuer completes and submits to an exchange when it applies to list its shares in the exchange is called listing application. The issuer must disclose its activities, plans, management and finances in the application. 23. PROSPECTUS:-

A legal document describing securities being offered for sale to the public is called as prospectus. It must be prepared in accordance with provincial securities commission regulations. Prospectus documents usually disclose pertinent information concerning the company's operations, securities, management and purpose of the offering.

GLOBAL SCENARIO In 12th century France the courratiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. Because these men also traded with debts, they could be called the first brokers.. In the middle of the 13th century, Venetian bankers began to trade in government securities. In 1351 the Venetian government outlawed spreading rumours intended to lower the price of government funds. Bankers in Pisa, Verona, Genoa and Florence also began trading in government securities during the 14th century. This was only possible because these were independent city states not ruled by a duke but a council of influential citizens. Italian companies were also the first to issue shares. Companies in England and the Low Countries followed in the 16th century. The Dutch East India Company (founded in 1602) was the first joint-stock company to get a fixed capital stock and as a result, continuous trade in company stock emerged on the Amsterdam Exchange. Soon thereafter, a lively trade in various derivatives, among which options and repos, emerged on the Amsterdam market. Dutch traders also pioneered short selling - a practice which was banned by the Dutch authorities as early as 1610. There are now stock markets in virtually every developed and most developing economies, with the world's largest markets being in the United States, United Kingdom, Japan, India, China, Canada, Germany (Frankfurt Stock Exchange), France, South Korea and the Netherlands. The oldest existing stock certificate was issued by a Dutch Company Vereinigte Oostindische in the year 1606 seeking profit from spice trade to India and Far East . Though very profitable in its day, when the company was dissolved in 1799, it was some 10 million Dutch guilders in debt. Today that share certificate is worth well more than the stake in the company it originally represented. While antique stock shares have become a collectible, millions of people around the world invest in companies and own their stock for different reasons the possibility of financial return on investing in well-run, profitable companies that deliver needed goods and services.

OLD TO NEW WORLD Much of the business of stocks and securities in the Old World revolved around shipping and the spice trade in the early days. First, it was the maritime empires of the Netherlands and Portugal, then later Spain, France, and England. With the emergence of the British Royal Navy as the supreme force on the seas during and following the Napoleonic Wars at the end of the 18th and beginning of the 19th centuries, the seat of trading commerce moved to England. When the idea of trading stocks came to America with English colonists with the birth of the United States came the need to develop economic power in addition to military might. Alexander Hamilton, the first U.S. Secretary of the Treasury, had studied the stock exchanges in Britain and believed they were essential to building and maintaining a vital and robust economy. During his term from 1789 to 1795, he promoted the development of American stock exchanges. MAJOR STOCK EXCHANGES Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Economy
United States Europe United States Europe Japan United Kingdom China Hong Kong Canada Brazil Australia Germany Switzerland China Spain India South Korea

Stock exchange NYSE Euronext (US & Europe) NASDAQ OMX (US & North Europe) Tokyo Stock Exchange London Stock Exchange Shanghai Stock Exchange Hong Kong Stock Exchange Toronto Stock Exchange BM&F Bovespa Australian Securities Exchange Deutsche Brse SIX Swiss Exchange Shenzhen Stock Exchange BME Spanish Exchanges Bombay Stock Exchange Korea Exchange

Location New York City New York City Tokyo London Shanghai Hong Kong Toronto So Paulo Sydney Frankfurt Zurich Shenzen Madrid Mumbai Seoul

16 17 18

India South Africa Russia

National Stock Exchange of India JSE Limited MICEX

Mumbai Johannesburg Moscow

BUYING AND SELLING SHARES: To buy and sell the shares the investor has to locate register broker or sub broker who render prompt and efficient service to him. The order to buy or sell specifying the number of shares of the company of investors choice is placed with the broker. The order may be of any type. After receiving the order the broker tries to execute the order in his computer terminal. Once matching order is found, the order is executed. The broker then delivers the contract note to the investor. It gives the details regarding the name of the company, number of shares bought, price, brokerage, and the date of delivery of share. In this physical trading form, once the broker gets the share certificate through the clearing houses he delivers the share certificate along with transfer deed to the investor. The investor has to fill the transfer deed and stamp it. The stamp duty is one of the percentage considerations, the investor should lodge the share certificate and transfer deed to the register or transfer agent of the company. If it is bought in the DEMAT form, the broker has to give a matching instruction to his depository participant to transfer shares bought to the investors account. The investor should be account holder in any of the depository participant. In the case of sale of shares on receiving payment from the purchasing broker, the broker effects the payment to the investor.

THE STOCK MARKET: A LOOK BACK History offers fascinating lessons - the twentieth century was no exception. In the book "Triumph Of The Optimists: 101 Years Of Global Investment Returns" (2002), Elroy Dimson, Paul Marsh and Mike Staunton offer the most complete study of historical global market returns. The book documents market returns for 16 countries from 1900 to 2000. From this research, it is evident that three important changes took place in the global stock market in the last century: the U.S. achieved market dominance; the exchanges were consolidated; and secular sector rotation occurred. Unfortunately, understanding the past doesn't necessarily make predicting the markets' future any easier.

TO THE WINNER GO THE SPOILS Unfortunately, until "Triumph Of The Optimists" was published, most of the available historical stock market data for the years prior to 1970 was only for the U.S. market. This isn't surprising, since the U.S. stock market was the big winner of the twentieth century. Its weighting increased to 47% of the world's total and, in general, it performed more favourably than the rest of the world's markets. This occurred for a number of reasons, but chief among them were larger investments in physical and human capital, greater technological advancement and greater productivity growth. With its huge investment demand and technological superiority, the U.S. investment industry was a worldwide leader. By contrast, other countries have lesser-known histories. For example, it took the U.K. much longer to recover from the world wars. Its diminished role after the collapse of the British Empire and the complicated bureaucracies of the colonial system slowed the U.K.'s growth immeasurably. According to the authors, problems with defence spending, labour, productivity and investment plagued the British economy and markets until the mid 1970s.

The U.S., on the other hand, suffered relatively little disruption to its stock market during the world wars and didn't have the prolonged declines that many of the European and Asian markets experienced. In fact, the United States' economy largely benefited from the wars successful companies such as General Motors and IBM thrived as a result. At the same time, many other economies suffered great losses. For example, according to Phillipe Jorion and William N. Goetzmann in their article "Global Stock Markets In The Twentieth Century" (1999), the Japanese stock market saw a 95% decline in real returns between 1944 and 1949! The German market also suffered devastating losses. In this context, the U.S. market's success seems to be an exception, which the previous lack of data for other countries may have obscured.

PAST SUCCESS AND FUTURE PERFORMANCE Many valuable lessons can be learned from history, but extrapolating historical returns into the future is difficult and complicated. For instance, few investors in 1900 could have predicted the monumental changes that would take place in the world after 1913. The two world wars, socialist revolutions, the Great Depression and the Bretton Woods Agreement all

had a profound impact on the global economy and stock markets until the 1970s. The graphs below show a breakdown of the world markets in both 1900 and 2000 and the anomalous growth of the U.S. market during this time.

GLOBALIZATION AND CONSOLIDATION The stock markets of 1900 had more regional exchanges than those of today. For example, Dimson, Marsh and Staunton state that the U.S. and U.K. each had 20 to 30 different regional exchanges. Most of these exchanges - such as the Los Angeles Exchange, which dealt with the petroleum industry - focused on the industries prevalent in their areas.

The difference between the number of exchanges in the early-twentieth century and the number that exists today is due mostly to advancements in telecommunications and innovation within financial markets. Advancement like that have propelled the globalization of our economy and its financial markets. Today, New York, London and Tokyo are widely regarded as the world's financial centres, and technological advances have allowed them to be interconnected despite the distance between them. As a result, the twenty-first century global economy is defined by financial centres rather than smaller regional exchanges. HISTORICAL SECTORAL ROTATION Many investors today focus on short-term sector rotation to add value to their portfolios. According to Dimson, Marsh and Staunton's research, this type of rotation pales in comparison to the changes that can take place over the long term. Sector analysis of the U.S. market between 1900 and 2000 shows us an interesting picture. Sl no 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Sectors Rail and road Baking and finance Mining Textile Iron coal steel Distillers Utilities Telegraph and telephone Insurance Other transport Chemicals Food manufacturing Retailers Tobacco Small sectors in 1990 Total 1990 in percentage 62.8 6.7 0 .7 5.2 .3 4.8 3.9 0 3.7 .5 2.5 .1 4 4.8 100 2000 .2 12.9 0 .2 .3 .4 3.8 5.6 4.9 .5 1.2 1.2 5.6 .8 62.4 100 Difference -62.6 6.2 0 -.5 -4.9 .1 -i 1.7 4.9 -3.2 .7 -1.3 5.5 -3.2 57.6

Table I Just as a country's influence over global economics evolves, so do the sectors of an economy. As these two tables show, the economies of 1900 and 2000 had few similarities. Of particular note are the sectors that were small in 1900 and 2000. For instance, 84% of the sectors today (represented by market capitalization) were of immaterial size or were non-existent at the

beginning of the last century. These sweeping changes also make extrapolating future market performance from past events difficult. Technological advancements have a big impact on the stock market. Just as railroads consumed the investing public in the latter part of the nineteenth century, computers and the internet did the same at the end of the twentieth century.

LARGEST SINGLE DAY LOSSES IN THE HISTORY Aug. 4, 2011 Dropped 512.76 points Fears that the country is headed for a double-dip recession, coupled with mounting concern that Spain and Italy will slump deeper into the European debt crisis, sparked the worst sell-off since the 2008 recession began. The Dow slid 512.76 points, dropping 4.3 percent. And while percentage-wise the market lost about a quarter as much as Black Thursday in 1929, for example, about $2.3 trillion in investor wealth had evaporated by the end of the day. Oct. 22, 2008 Dropped 514.45 points

The month of October 2008 was one of the worst in New York Stock Exchange history, with three of the top 10 largest single-day drops ever recorded during the month. The ninth-largest drop was sparked by increasing fears of a global recession. Weak corporate profit forecasts, including a worse-than-expected loss from bank Wachovia. Slightly more than a month before an official recession would be declared, the Dow closed with a 514 point loss, shedding 5.7 percent throughout the day of trading. Oct. 27, 1997 Dropped 554.26 points

Big losses in the Asian markets throughout the night prompted a big sell-off in the U.S. markets. For the first time in history, trading at the New York Stock Exchange was halted mid-day after the market nosedived, triggering a "circuit breaker" that timed-out trading for

30 minutes. The 1988 circuit breaker rule was created to prevent another snowballing sellingspree such as the one on Oct. 19, 1987, when the Dow plummeted 22 percent in one day. But even after the time-out, stocks continued to fall, triggering another hour-long circuit breaker when the Dow dropped 555 points. With less than an hour left in the trading day, the market closed early. The Dow closed with a loss of 554.26 points, or 7.2 percent. April 14, 2000 Dropped 617.78 points

At the turn of the century, the technology sector was booming and the tech investment bubble was growing. But a warning from the Fed that inflation might rise faster than expected sent a sobering shock through the market, in effect bursting the tech-bubble and causing the NASDAQ, a technology-heavy stock index, to clock its worst day ever with 356 points, or 10 percent, lost.
Aug. 8, 2011

Dropped 634.76 points

Monday's market drop clocks in as the sixth worst in history. The Dow lost 634.76 points, or 5.6 percent, after S&P's announcement that the rating agency was downgrading the United State's perfect AAA credit rating to AA+. The downgrade sent shockwaves through stock markets around the world. U.S. investors watched $2.3 trillion in market values vanish in the six-hour trading day. S&P said it decided on the downgrade because the debt-ceiling plan did not go far enough to reduce the debt and the "political brinkmanship of recent months" showed that U.S. politics are "less stable, less effective and less predictable than what we previously believed." Oct. 9, 2008 Dropped 678.91 points

Exactly one year after the S&P 500 hit an all-time high, the Dow plunged 679 points, the fifth largest single-day drop in history. In the year between the 2007 high and the Oct. 9 drop, the

S&P had fallen 42 percent. The steep one-day decline came after news that the auto sales were set to hit record lows for the year and continue to decline throughout 2009. That day General Motors stock fell 31 percent and Ford lost 21 percent.

Dec. 1, 2008 Dropped 679.95 points

After a year of profuse job loss, stagnant wages and declining production, the National Bureau of Economic Research officially declared that the United States was in a recession and was not expected to grow again for at least a year. The news caused stocks to fall around the world, a market reaction that was coupled by the bubbling Euro zone debt crisis involving Greece, Ireland, Spain and Italy. Sept. 17, 2001 Dropped 684.81 points

The worst terrorist attack in U.S. history scarred the New York skyline and shook the New York Stock Exchange, which remained closed for a week after the attack. When the markets opened the following Monday the Dow plummeted more than 7 percent, and dropping 685 points. Airline stocks saw some of the steepest declines and the Dow Jones transportation average fell 343 points, or 12.8 percent. Oct. 15, 2008 Dropped 733.08 points

The market did not react fondly when President George W. Bush announced that the U.S. government was going to partially take over the nine largest banks in America. In what amounted to the largest intervention into the banking sector since the Great Depression, Bush said injecting $250 billion of public money into banks was necessary to jump-start lending, which had become stagnant after the housing bubble burst. The day after Bush's announcement, the Dow shed 733 points, dropping nearly 8 percent, and earning the day the

No. 9 spot in the top-10 largest percentage drops in stock market history and giving it the No. 2 worst point losses in the history of the Dow. Sept. 29, 2008 Dropped 777.68 points

When home values started to slide to their worst prices since the Great Depression, the value of trillions of dollars worth of mortgage-backed securities plummeted, draining banks of their cash. As a result, banks were in dire straits. Lehman Brothers filing for bankruptcy and the Fed bailed out insurance giant AIG. But it was the failure of the House to pass a bank bailout bill that sparked panic in the stock exchange. By the time the markets closed, $1.2 trillion had vanished and the Dow had lost 777.68 points, the most points ever lost in a single day of trading in the history of the New York Stock Exchange. 4 MAJOR FACTORS AFFECTING STOCK PRICE 1. Company Performance. People use Price-Earning Ratio(P/E) to value a stock.. Generally, company with higher earning has higher price than those with lower earnings. (This is not always the case though, as I will state next.) 2. Company Prospect. Growth in earning will ultimately be reflected in stock price. If people are expecting the company a much higher earning in future, they will give the stock a much greater P/E ratio, thus a high price. Companies which introduce new products to market, or obtain new major contracts, are expected to see a bull run in the stock price. 3. Industry Prospect. Most of the times, the stock price of the companies in the same industry will move in tandem with each other. This is because market conditions will generally affects the companies in the same industry the same way. 4. Stock Overall Index. In a bull market, the stock price of most companies will rise and in a bear market the stock price of most companies will fall.

Other Factors. Stock price is a reflection of people sentiment, so any factors which affect people emotion will cause stock price to fluctuate. For example, stock splitting, analyst upgrading/downgrading, patent approval, natural disaster, just to name a few. FORCES THAT MOVE STOCK PRICES These forces fall into three categories: fundamental factors, technical factors and market sentiment. Fundamental Factors In an efficient market, stock prices would be determined primarily by fundamentals, which, at the basic level, refer to a combination of two things: 1) An earnings base (earings per share (EPS), for example) and 2) a valuation multiple (a P/E ratio, for example).

An owner of a common stock has a claim on earnings and, earnings per share (EPS) is the owner's return on his or her investment. When one buys a stock, he is purchasing a proportional share of an entire future stream of earnings. That's the reason for the valuation multiple: it is the price he is willing to pay for the future stream of earnings. Part of these earnings may be distributed as dividends, while the remainder will be retained by the company (on behalf of investor) for reinvestment. Technical Factors Things would be easier if only fundamental factors set stock prices! Technical factors are the mix of external conditions that alter the supply of and demand for a company's stock. Some of these indirectly affect fundamentals. For example, economic growth indirectly contributes to earnings growth. Technical factors include the following:

Inflation - We mentioned inflation as an input into the valuation multiple, but inflation is a huge driver from a technical perspective as well. Historically, low inflation has had a strong inverse correlation with valuations (low inflation drives high multiples and high inflation drives low multiples). Deflation, on the other hand, is generally bad for stocks because it signifies a loss in pricing power for companies.

Economic Strength of Market and Peers - Company stocks tend to track with the market and with their sector or industry peers. Some prominent investment firms argue that the

combination of overall market and sector movements - as opposed to a company's individual performance - determines a majority of a stock's movement. (There has been research cited that suggests the economic/market factors account for 90%!) For example, a suddenly negative outlook for one retail stock often hurts other retail stocks as "guilt by association" drags down demand for the whole sector.

Substitutes - Companies compete for investment dollars with other asset classes on a global stage. These include corporate bonds, government bonds, commodities, real estate and foreign equities. The relation between demand for U.S. equities and their substitutes is hard to figure, but it plays an important role.

Incidental Transactions - Incidental transactions are purchases or sales of a stock that are motivated by something other than belief in the intrinsic value of the stock. These transactions include executive insider transactions, which are often prescheduled or driven by portfolio objectives. Another example is an institution buying or shorting a stock to hedge some other investment. Although these transactions may not represent official "votes cast" for or against the stock, they do impact supply and demand and therefore can move the price.

Demographics - Some important research has been done about the demographics of investors. Much of it concerns these two dynamics: 1) middle-aged investors, who are peak earners that tend to invest in the stock market, and 2) older investors who tend to pull out of the market in order to meet the demands of retirement. The hypothesis is that the greater the proportion of middle-aged investors among the investing population, the greater the demand for equities and the higher the valuation multiples.

Trends - Often a stock simply moves according to a short-term trend. On the one hand, a stock that is moving up can gather momentum, as "success breeds success" and popularity buoys the stock higher. On the other hand, a stock sometimes behaves the opposite way in a trend and does what is called reverting to the mean. Unfortunately, because trends cut both ways and are more obvious in hindsight, knowing that stocks are "trendy" does not help us predict the future. Trends could also be classified under market sentiment.

Liquidity - Liquidity is an important and sometimes under-appreciated factor. It refers to how much investor interest and attention a specific stock has. Wal-Mart's stock is highly liquid and therefore highly responsive to material news; the average small-cap company is less so. Trading volume is not only a proxy for liquidity, but it is also a function of corporate communications (that is, the degree to which the company is getting attention from the

investor community). Large-cap stocks have high liquidity: they are well followed and heavily transacted. Many small-cap stocks suffer from an almost permanent "liquidity discount" because they simply are not on investors' radar screens. Market Sentiment Market sentiment refers to the psychology of market participants, individually and collectively. Market sentiment is often subjective, biased and obstinate. For example, you can make a solid judgment about a stock's future growth prospects, and the future may even confirm your projections, but in the meantime the market may myopically dwell on a single piece of news that keeps the stock artificially high or low. And you can sometimes wait a long time in the hope that other investors will notice the fundamentals.

Market sentiment is being explored by the relatively new field of behavioural finance. It starts with the assumption that markets are apparently not efficient much of the time, and this inefficiency can be explained by psychology and other social sciences. The idea of applying social science to finance was fully legitimized when Daniel Kahneman, a psychologist, won the 2002 Nobel Memorial Prize in Economics. (He was the first psychologist to do so.) Many of the ideas in behavioral finance confirm observable suspicions: that investors tend to overemphasize data that come easily to mind; that many investors react with greater pain to losses than with pleasure to equivalent gains; and that investors tend to persist in a mistake.

Some investors claim to be able to capitalize on the theory of behavioral finance. For the majority, however, the field is new enough to serve as the "catch-all" category, where everything we cannot explain is deposited.

Summary Different types of investors depend on different factors. Short-term investors and traders tend to incorporate and may even prioritize technical factors. Long-term investors prioritize fundamentals and recognize that technical factors play an important role. Investors who believe strongly in fundamentals can reconcile themselves to technical forces with the following popular argument: technical factors and market sentiment often overwhelm the short run, but fundamentals will set the stock price in the long-run. In the meantime, we can expect more exciting developments in the area of behavioural finance since traditional financial theories cannot seem to explain everything that happens in the market.

TOP TEN STOCKS FOR 2012

The Wall Street Journal Smart Money recently named the top ten stocks to invest in for 2012 . Many of the picks were based on the premise that the world continues to grow and will need more food and technology. Potash Corp. (NYSE:POT): Produces potash, phosphate, and nitrogen to the agricultural and industrial industries worldwide. The Company conducts operations in Canada, Chile, the United States, Brazil, and Trinidad. Potash is the worlds largest supplier of potash. CNOOC Ltd. (NYSE:CEO): Through its subsidiaries, explores, develops, produces, and sells crude oil and natural gas. CNOOC is Chinas (NYSE:FXI) largest producer of crude oil and natural gas. Standard & Poors estimates that China will register a 6 percent increase in crude oil consumption for 2012, a comfortable amount for CNOOC. SAP AG (NYSE:SAP): A multinational software company. The Company develops business software, including e-business and enterprise management software, consults on organizational usage of its applications software, and provides training services. Investors need to proceed with caution as the company receives a large amount of revenue from Europe. Siemens AG (NYSE:SI): Manufactures a wide range of industrial and consumer products. The Company builds locomotives, traffic control systems, automotive electronics, and engineers electrical power plants. Siemens also provides public and private communications networks, computers, building control systems, medical equipment, and electrical components. AT&T (NYSE:T): A communications holding company. The Company, through its subsidiaries and affiliates, provides local and long-distance phone service, wireless and data communications, Internet access and messaging, IP-based and satellite television, security services, telecommunications equipment, and directory advertising and publishing. The company is currently working on a deal to acquire T-Mobile. Exelon Corporation (NYSE:EXC): A utility services holding company. The Company, through its subsidiaries distributes electricity to customers in Illinois and

Pennsylvania. Exelon also distributes gas to customers in the Philadelphia area as well as operates nuclear power plants in states that include Pennsylvania and New Jersey. It is the nations largest nuclear-power producer. Newmont Mining Corp. (NYSE:NEM): Acquires, explores, and develops mineral properties. The Company produces gold from operations in the United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand and Mexico. Newmont also mines and processes copper in Indonesia. Gold (NYSEARCA:GLD) has enjoyed eleven consecutive years of positive returns. Newmont currently offers a gold-linked dividend in order to help return profits to shareholders. New Gold, Inc. (AMEX:NGD): A natural resource company. The Company acquires, explores, and develops gold properties. New Gold produced 383,000 ounces of gold in 2010, and plans to produce nearly 500,000 ounces by the end of 2012. Google Inc. (NASDAQ:GOOG): A global technology company that provides a web based search engine through its website. The Company offers a wide range of search options, including web, image, groups, directory, and news searches. SmartMoney also picked Google as a top stock for 2011. Currently, shares have increased about 6.5% year-to-date. A rather modest gain, but still a gain. Baidu, Inc. (NASDAQ:BIDU): Operates an Internet search engine. The Company offers algorithmic search, enterprise search, pay for performance and news, MP3, and image searches. Over 75% of revenue from Chinese internet searches go to Baidu.

INDIAN SCENARIO FINANCIAL MARKET: Financial markets are helpful to provide liquidity in the system and for smooth functioning of the system. These markets are the centres that provide facilities for buying and selling of financial claims and services. The financial markets match the demands of investment with the supply of capital from various sources. According to functional basis financial markets are classified into two types. They are: Money markets (short-term) Capital markets (long-term)

According to institutional basis again classified in to two types. They are Organized financial market Non-organized financial market. The organized market comprises of official market represented by recognized institutions, bank and government (SEBI) registered/controlled activities and intermediaries. The unorganized market is composed of indigenous bankers, moneylenders, individual professional and non-professionals. MONEY MARKET: Money market is a place where we can raise short-term capital. Again the money market is classified in to: Inter bank call money market Bill market and Bank loan market Etc. Treasury bills, commercial papers. CAPITAL MARKET The capital market is the market for securities, where companies and the government can raise long term funds. The capital market includes the stock market and the bond market. Financial regulators ensure that investors are protected against fraud. The capital markets consist of the primary market, where new issues are distributed to investors, and the secondary market, where existing securities are traded.

Capital market thus plays a vital role in channelizing the savings of individuals for Investment in the economic development of the country. As a result the investors are not constrained by their individual abilities, but by the abilities of the companies, which in turn enhance the savings and investments in the country, liquidity of capital market is an important factor affecting growth. Since projects require long term finance, but on the other hand, the investor may not like to relinquish control over their savings for a long time. A liquid stock market ensures a quick exit without incurring heavy losses or costs. Thus development of efficient market system is necessary for creating conductive climate for investment and economic growth. Capital market is a place where we can raise long-term capital. Again the capital market is classified in to two types and they are: Primary market and Secondary market.

E.g.: Shares, Debentures, and Loans etc. PRIMARY MARKET: Primary market is generally referred to the market of new issues or market for mobilization of resources by the companies and government undertakings, for new projects as also for expansion, modernization, addition, and diversification and up gradation. Primary market is also referred to as New Issue Market. Primary market operations include new issues of shares by new and existing companies, further and right issues to existing shareholders, public offers, and issue of debt instruments such as debentures, bonds, etc.The primary market is regulated by the Securities and Exchange Board of India (SEBI a government regulated authority). Function: The main services of the primary market are origination, underwriting, and distribution. Origination deals with the origin of the new issue. Underwriting contract make the shares predictable and remove the element of uncertainty in the subscription. Distribution refers to the sale of securities to the investors.

The following are the market intermediaries associated with the market: 1. Merchant banker/book building lead manager 2. Registrar and transfer agent 3. Underwriter/broker to the issue 4. Adviser to the issue 5. Banker to the issue 6. Depository 7. Depository participant

SECONDARY MARKET The primary market deals with the new issues of securities. Outstanding securities are traded in the secondary market, which is commonly known as stock market or stock exchange. The secondary market is a market where scrips are traded. It is a market place which provides liquidity to the scrips issued in the primary market. Thus, the growth of secondary market depends on the primary market. More the number of companies entering the primary market, the greater are the volume of trade at the secondary market. Trading activities in the secondary market are done through the recognized stock exchanges which are 23 in number including Over the Counter Exchange of India (OTCE), National Stock Exchange of India and Interconnected Stock Exchange of India. Secondary market operations involve buying and selling of securities on the stock exchange through its members. The companies hitting the primary market are mandatory to list their shares on one or more stock exchanges in India. Listing of scrips provides liquidity and offers an opportunity to the investors to buy or sell the scrips. The following are the intermediaries in the secondary market: 1. Broker/member of stock exchange buyers broker and sellers broker 2. Portfolio Manager 3. Investment advisor 4. Share transfer agent 5. Depository 6. Depository participants.

STOCK MARKETS IN INDIA: Stock exchanges are the perfect type of market for securities whether of government and semi-govt bodies or other public bodies as also for shares and debentures issued by the jointstock companies. In the stock market, purchases and sales of shares are affected in conditions of free competition. Government securities are traded outside the trading ring in the form of over the counter sales or purchase. The bargains that are struck in the trading ring by the members of the stock exchanges are at the fairest prices determined by the basic laws of supply and demand. Definition of a stock exchange: Stock exchange means anybody or individuals whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities. The securities include: Shares of public company. Government securities. Bonds

HISTORY OF STOCK EXCHANGES IN INDIA: The only stock exchanges operating in the 19th century were those of Mumbai setup in 1875 and Ahmadabad set up in 1894. These were organized as voluntary non-profit-marking associations of brokers to regulate and protect their interests. Before the control on securities under the constitution in 1950, it was a state subject and the Bombay securities contracts (control) act of 1925 used to regulate trading in securities. Under this act, the Mumbai stock exchange was recognized in 1927 and Ahmadabad in 1937. During the war boom, a number of stock exchanges were organized. Soon after it became a central subject, central legislation was proposed and a committee headed by A.D.Gorwala went into the bill for securities regulation. On the basis of the committees recommendations and public discussion, the securities contract (regulation) act became law in 1956. In earlier times, buyers and sellers used to assemble at stock exchanges to make a transaction but now with the dawn of IT, most of the operations are done electronically and the stock markets have become almost paperless. Now investors do not have to gather at the

Exchanges, and can trade freely from their home or office over the phone or through Internet. One of the oldest stock markets in Asia, the Indian Stock Markets have a 200 years old history. 18th Century 1830's 1840's 1850's 1860's 1860-61 East India Company was the dominant institution and by end of the century, busuness in its loan securities gained full momentum Business on corporate stocks and shares in Bank and Cotton presses started in Bombay. Trading list by the end of 1839 got broader Recognition from banks and merchants to about half a dozen brokers Rapid development of commercial enterprise saw brokerage business attracting more people into the business The number of brokers increased to 60 The American Civil War broke out which caused a stoppage of cotton supply from United States of America; marking the beginning of the "Share Mania" in India The number of brokers increased to about 200 to 250 A disastrous slump began at the end of the American Civil War (as an example, Bank of Bombay Share which had touched Rs. 2850 could only be sold at Rs. 87)

1862-63 1865

Pre-Independance Scenario - Establishment of Different Stock Exchanges 1874 With the rapidly developing share trading business, brokers used to gather at a street (now well known as "Dalal Street") for the purpose of transacting business. "The Native Share and Stock Brokers' Association" (also known as "The Bombay Stock Exchange") was established in Bombay Development of cotton mills industry and set up of many others Establishment of "The Ahmedabad Share and Stock Brokers' Association" Sharp increase in share prices of jute industries in 1870's was followed by a boom in tea stocks and coal "The Calcutta Stock Exchange Association" was formed Madras witnessed boom and business at "The Madras Stock Exchange" was transacted with 100 brokers. When recession followed, number of brokers came down to 3 and the Exchange was closed down Establishment of the Lahore Stock Exchange Merger of the Lahoe Stock Exchange with the Punjab Stock Exchange

1875 1880's 1894 1880 - 90's 1908 1920 1923 1934 1936

1937

Re-organisation and set up of the Madras Stock Exchange Limited (Pvt.) Limited led by improvement in stock market activities in South India with establishment of new textile mills and plantation companies Uttar Pradesh Stock Exchange Limited and Nagpur Stock Exchange Limited was established Establishment of "The Hyderabad Stock Exchange Limited" "Delhi Stock and Share Brokers' Association Limited" and "The Delhi Stocks and Shares Exchange Limited" were established and later on merged into "The Delhi Stock Exchange Association Limited"

1940 1944 1947

Post Independance Scenario The depression witnessed after the Independance led to closure of a lot of exchanges in the country. Lahore Estock Exchange was closed down after the partition of India, and later on merged with the Delhi Stock Exchange. Bnagalore Stock Exchange Limited was registered in 1957 and got recognition only by 1963. Most of the other Exchanges were in a miserable state till 1957 when they applied for recognition under Securities Contracts (Regulations) Act, 1956. The Exchanges that were recognized under the Act were: 1. Bombay 2. Calcutta 3. Madras 4. Ahmadabad 5. Delhi 6. Hyderabad 7. Bangalore 8. Indore Many more stock exchanges were established during 1980's, namely: 1. Cochin Stock Exchange (1980) 2. Uttar Pradesh Stock Exchange Association Limited (at Kanpur, 1982) 3. Pune Stock Exchange Limited (1982) 4. Ludhiana Stock Exchange Association Limited (1983) 5. Gauhati Stock Exchange Limited (1984) 6. Kanara Stock Exchange Limited (at Mangalore, 1985)

7. Magadh Stock Exchange Association (at Patna, 1986) 8. Jaipur Stock Exchange Limited (1989) 9. Bhubaneswar Stock Exchange Association Limited (1989) 10. Saurashtra Kutch Stock Exchange Limited (at Rajkot, 1989) 11. Vadodara Stock Exchange Limited (at Baroda, 1990) 12. Coimbatore Stock Exchange 13. Meerut Stock Exchange

TRADING PATTERN OF THE INDIAN STOCK MARKET

Listed securities of public companies

Specified securities

Non specified securities

Equity shares of the company that are: Dividend paying Growth oriented companies Paid up capital of at least Rs. 50 Million Market capitalisation of at least Rs. 100 Million More than 20000 share holders.

Equity shares of the company not covered in specified securities

TYPES OF TRANSACTIONS The flowchart below describes the types of transactions that can be carried out on the Indian stock exchanges: Transactions in Indian stock market

Spot delivery transaction Includes transactions that require delivery and payment within stipulated time period at the time of entering into contract. This period shall not be more than 14 days following the date of contract.

Forward transactions Transactions in which delivery and payment can be extended by further period of 14 days each. The overall period should not exceed 90 days from the date of contract. Transactions permitted only in case of specified shares.

Indian stock exchange allows a member broker to perform following activities: 1. Act as an agent, 2. Buy and sell securities for his clients and charge commission for the same, 3. Act as a trader or dealer as a principal, 4. Buy and sell securities on his own account and risk. MAJOR STOCK EXCHANGES: NSE The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges, which recommended promotion of a National Stock Exchange by financial institutions (FIs) to provide access to investors from all across the country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the country. On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment commenced operations in

November 1994 and operations in Derivatives segment commenced in June 2000 NSE's mission is setting the agenda for change in the securities markets in India. The NSE was setup with the main objectives of: Establishing a nation-wide trading facility for equities and debt instruments. Ensuring equal access to investors all over the country through an appropriate communication network. Providing a fair, efficient and transparent securities market to investors using electronic trading systems. Enabling shorter settlement cycles and book entry settlements systems, and meeting the current international standards of securities markets. The standards set by NSE in terms of market practices and technology, have become industry benchmarks and are being emulated by other market participants. NSE is more than a mere market facilitator. It's that force which is guiding the industry towards new horizons and greater opportunities. BSE The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as "The Native Share and Stock Brokers Association". It is the oldest one in Asia, even older than the Tokyo Stock Exchange, which was established in 1878. It is a voluntary non-profit making Association of Persons (AOP) and is currently engaged in the process of converting itself into demutualised and corporate entity. It has evolved over the years into its present status as the premier Stock Exchange in the country. It is the first Stock Exchange in the Country to have obtained permanent recognition in 1956 from the Govt. of India under the Securities Contracts (Regulation) Act 1956.The Exchange, while providing an efficient and transparent market for trading in securities, debt and derivatives upholds the interests of the investors and ensures redresses of their grievances whether against the companies or its own memberbrokers. It also strives to educate and enlighten the investors by conducting investor education programmers and making available to them necessary informative inputs. A Governing Board having 20 directors is the apex body, which decides the policies and regulates the affairs of the Exchange. The Governing Board consists of 9 elected directors, who are from the broking community (one third of them retire ever year by rotation), three SEBI nominees, six public representatives and an Executive Director & Chief Executive Officer and a Chief Operating Officer. The Executive Director as the Chief Executive Officer

is responsible for the day to-day administration of the Exchange and the Chief Operating Officer and other Heads of Department assist him. The Exchange has inserted new Rule No.126 A in its Rules, Byelaws pertaining to constitution of the Executive Committee of the Exchange. Accordingly, an Executive Committee, consisting of three elected directors, three SEBI nominees or public representatives, Executive Director & CEO and Chief Operating Officer has been constituted. The Committee considers judicial & quasi matters in which the Governing Board has powers as an Appellate Authority, matters regarding annulment of transactions, admission, continuance and suspension of member brokers, declaration of a member-broker as defaulter, norms, procedures and other matters relating to arbitration, fees, deposits, margins and other monies payable by the member-brokers to the Exchange, etc.

REGULATORY FRAME WORK OF STOCK EXCHANGE

A comprehensive legal framework was provided by the Securities Contract Regulation Act, 1956 and Securities Exchange Board of India 1952. Three tier regulatory structure comprising Ministry of finance The Securities And Exchange Board of India Governing body

MEMBERS OF THE STOCK EXCHANGE The securities contract regulation act 1956 has provided uniform regulation for the admission of members in the stock exchanges. The qualifications for becoming a member of a recognized stock exchange are given below: The minimum age prescribed for the members is 21 years. He should be an Indian citizen. He should be neither a bankrupt nor compound with the creditors. He should not be convicted for fraud or dishonesty. He should not be engaged in any other business connected with a company. He should not be a defaulter of any other stock exchange. The minimum required education is a pass in 12th standard examination.

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) The securities and exchange board of India was constituted in 1988 under a resolution of government of India. It was later made statutory body by the SEBI act 1992.according to this act, the SEBI shall constitute of a chairman and four other members appointed by the central government. With the coming into effect of the securities and exchange board of India act, 1992 some of the powers and functions exercised by the central government, in respect of the regulation of stock exchange were transferred to the SEBI. OBJECTIVES AND FUNCTIONS OF SEBI To protect the interest of investors in securities. Regulating the business in stock exchanges and any other securities market. Registering and regulating the working of intermediaries associated with securities market as well as working of mutual funds. Promoting and regulating self-regulatory organizations. Prohibiting insider trading in securities. Regulating substantial acquisition of shares and take over of companies. Performing such functions and exercising such powers under the provisions of capital issues (control) act, 1947and the securities to it by the central government.

SEBI GUIDELINES TO SECONDARY MARKETS: (STOCK EXCHANGES): Board of Directors of Stock Exchange has to be reconstituted so as to include nonmembers, public representatives and government representatives to the extent of 50% of total number of members. Capital adequacy norms have been laid down for the members of various stock exchanges depending upon their turnover of trade and other factors. All recognized stock exchanges will have to inform about transactions within 24 hrs. MARKET TIMINGS:Normal Market / Exercise Market Open time : 09:00 hours Normal market close : 15:30 hours Set up cut of time for Position limit/Collateral value : till 15:30 hrs Trade modification end time / Exercise Market : 16:15 hour

GLOBAL FACTORS BEHIND STOCK MARKET VOLATILITY The domestic stock markets have come a long way in terms of maturity over the last few years. Mature and developed markets provide high returns with low volatility in the long term. A mature stock market provides an efficient channel for the corporate to access savings of investors. The rise and fall of share prices depend on various market forces and the factors that affect stock markets have increased significantly over the last one decade due to globalisation and technological advancements. This economy is the second fastest growing one in the world today. The real GDP grew at an average rate of more than eight percent per annum over the last three years. The volatility in the domestic markets has increased significantly over the last few years. Volatility is an important consideration while computing risk, and hence the returns expectation from investments in the market. These are some market forces that directly or indirectly drive the stock market volatility. Global factors A major factor that is driving market volatility globally over the last few months is the US sub-prime crisis. Recently, the credit issues again triggered negative sentiments in the US market and the fear percolated down to markets worldwide. According to analysts, there is a growing concern that the depth of credit issues is still unknown and not quantified. Many leading financial services companies in the US have revised their top line forecasts downwards. There is a strong feeling in the market that the US economy will go through a recession phase in 2008. Since the US is the largest economy in the world, people are not clear about its impact on world economy and markets. The US dollar is weakening against all major currencies in the world. Crude oil prices have reached around USD 100 per barrel. This is another sentiment dampener in the global markets. Domestic factors Domestic markets have been the biggest out-performers as compared to other Asian markets. Even during the recent fall in global markets - most foreign markets have already corrected

by 10 to 15 percent from their peaks - the domestic markets were still quoting around their peak levels. Foreign institutional investors (FII) have been net sellers in the last couple of weeks. Currently, it looks like FIIs are sitting on huge profits and are booking profits to reward their investors. The rupee has seen sharp appreciation of 12 percent in last one year or so. This has made exports uncompetitive with respect to other global competitors. Market announcements like SEBI's proposal on restriction of further investments through the participatory notes (PN) route created panic in domestic stock markets last month. The Sensex crashed heavily after this announcement, but later recovered after a clarification by SEBI. The stock markets are quoting at very high levels (the Sensex is around 19,000 and Nifty around 5,700). Even a one percent rise or fall shows up as a 200 point movement in the Sensex. Domestic political scenario The political scenario has been volatile due to the coalition government. However, looking at the market trends over the last few years, the large market players are not very concerned with the political situation. The large investors believe in the long-term India growth story. TOP TEN STOCKS TO INVEST IN INDIA IN 2012 No: 1 2 Name of Stock NTPC Patel Engineering Sector Power Infrastructure Best Stocks, Why? Low risk low return, Shock absorber to portfolio in volatile markets. One of the fundamental pick with lot of subsidiaries and Business model can add value to Money. High risk scrip with low price earning, May turns Multibagger, single risk to this counter is high interest expenditure. One of the top Media scrip with growth potentials. Leading nationalized bank with sufficient

3 4 5

SEL Manufacturing Textiles NDTV SBI Media Banking

capitalized. 6 HDIL Realty High risk and High return scrip, can zoom in bull market with high beta value. Leading Consumer player. Highest population and Purchasing capacity can maintains company profits. FMCG sector is shock absorber when markets fall. Now a days need of new drugs is necessary. Major expansion plans on card to place in one of the top broadcaster. Education is a Fast growing sector and lot of space available for future developments.

Hindustan Unilever FMCG Limited Torrent Pharmaceuticals Limited

8 9

Pharma

Reliance Broadcast Media Education and Training

10 Career Point Info

TEN BIGGEST CRASHES IN INDIAN STOCK MARKET October 24, 2008: The Sensex plunged by 1070.63 points (10.96 per cent) to close at 8,701.07. The National Stock Exchange's Nifty ended at 2,557.25, down 13.11 per cent or 386 points. The BSE Midcap closed 8.38 per cent lower and BSE Smallcap Index ended 7.66 per cent down. March 17, 2008: The Bombay Stock Exchange [ Images ] benchmark Sensex crashed by 951 points to close at 14,809 on weak cues from the overseas markets. Unabated selling saw the index slip below the 15,000-mark

March 3, 2008: The Bombay Stock Exchange benchmark Sensex witnessed its secondlargest fall ever losing 900.84 points to close at 16,677.88 on frantic selling by funds, triggered by deepening concern over United States recession and some Budget-related concerns. January 21, 2008: The Sensex saw its highest ever loss of 1,408 points at the end of the session on Monday. The Sensex recovered to close at 17,605.40 after it tumbled to the day's low of 16,963.96, on high volatility as investors panicked following weak global cues amid fears of the US recession. January 22, 2008: The Sensex saw its biggest intra-day fall on Tuesday when it hit a low of 15,332, down 2,273 points. However, it recovered losses and closed at a loss of 875 points at

16,730. The Nifty closed at 4,899 at a loss of 310 points. Trading was suspended for one hour at the Bombay Stock Exchange after the benchmark Sensex crashed to a low of 15,576.30 within minutes of opening, crossing the circuit limit of 10 per cent. February 11, 2008: The Sensex finally ended with a loss of 834 points (4.8%) at 16,631. The NSE Nifty slipped over 5% (263 points) to 4,857. May 18, 2006: The Sensex registered a fall of 826 points (6.76 per cent) to close at 11,391, following heavy selling by FIIs, retail investors and a weakness in global markets. The Nifty crashed by 496.50 points (8.70%) points to close at 5,208.80 points. December 17, 2007: A heavy bout of selling in the late noon deals saw the index plunge to a low of 19,177 - down 856 points from the day's open. The Sensex finally ended with a huge loss of 769 points (3.8%) at 19,261. The NSE Nifty ended at 5,777, down 271 points. October 10, 2008: The markets crashed by 801 points to close at a low of 10,528. The crisis in the global markets, a fall in the rupee and poor IIP numbers led to the fall. October 18, 2007: Profit-taking in noon trades saw the index pare gains and slip into negative zone. The intensity of selling increased towards the closing bell, and the index tumbled all the way to a low of 17,771 - down 1,428 points from the day's high. The Sensex finally ended with a hefty loss of 717 points (3.8%) at 17,998. The Nifty lost 208 points to close at 5,351. January 18, 2008: Unabated selling in the last one hour of trade saw the index tumble to a low of 18,930 - down 786 points from the day's high. The Sensex finally ended with a hefty loss of 687 points (3.5%) at 19,014. The index thus shed 8.7% (1,813 points) during the week. The NSE Nifty plunged 3.5% (208 points) to 5,705. November 21, 2007: Mirroring weakness in other Asian markets, the Sensex saw relentless selling. The index tumbled to a low of 18,515 - down 766 points from the previous close. The Sensex finally ended with a loss of 678 points at 18,603. The Nifty lost 220 points to close at 5,561.

August 16, 2007: The Sensex, after languishing over 500 points lower for most of the trading sesion, slipped again towards the close to a low of 14,345. The index finally ended with a hefty loss of 643 points at 14,358.

April 2, 2007: The Sensex opened with a huge negative gap of 260 points at 12,812 following the Reserve Bank of India decision to hike the cash reserve ratio and repo rate. Unabated selling, mainly in auto and banking stocks, saw the index drift to lower levels as the day progressed. The index tumbled to a low of 12,426 before finally settling with a hefty loss of 617 points (4.7%) at 12,455. August 1, 2007: The Sensex opened with a negative gap of 207 points at 15,344 amid weak trends in the global market and slipped deeper into the red. Unabated selling across-the-board saw the index tumble to a low of 14,911 points. The Sensex finally ended with a hefty loss of 615 points at 14,936. The NSE Nifty ended at 4,346, down 183 points. This is the third biggest loss in absolute terms for the index.

REVIEW LITERATURE THE ROLE OF INTELLECTUAL CAPITAL IN CREATING VALUE IN THE MICRO FINANCE INDUSTRY Human Resource Management (HRM) provides an institution with an effective work force in order to meet its mission. Effective human resource management uses systems and tools to bring together: the right number of people, with the right attitude and skills, in the right place, at the right time. Human resources have two roles in risk management. First, people are a source of risk, e.g., shortage of employees, people doing sloppy work, an employee refusing to take on additional responsibility, or a key employee leaving two months after completion of a one-year training program. Second, people are important in handling risk, e.g., people using their ingenuity to solve unexpected problems, employees going the extra mile for the good of the organization, a key employee redesigning her own job to avoid unnecessary delays in getting work done, or an employee persuading a talented friend to apply for a position in the business.

Human resources include more than regular full-time employees. They include all management and labour personnel, family and non-family members, full-time and part-time people, and seasonal and year-round employees. People are the key factor to organizational success, innovation, and profitability. Thus the recruitment process is considered a crucial step in framing the organizational structure and thus the future of the organization. Managing Human Resources accordingly plays a vital role in shaping the behaviours and attitudes towards the organization. Continuous evaluation of employees' satisfaction is well desired to ensure the maximum loyalty and work efficiency to the organization. Improving employee compensation plans and benefits can be efficient drivers to increasing motivation and generating mutual benefits at the best of the organization. There has been an extraordinary surge of concern in business leadership in recent years, particularly in the qualities that should be possessed by the effective leaders now and in the future. With the fast changing nature of organizations and the ways of operating, there is a natural worry that current

leadership standards are keeping pace and will be still further behind in years to come. In markets of all sorts, organizations are growing in size and complexity and competition is becoming increasingly sharper. Recent competencies, values, and characteristics that leaders and potential leaders must develop should be identified in order to meet present and future challenges, which imply that organizations must start the process right now if they are to be successful in developing the next generation of global leaders. Never has there been a more important time for HR professionals in Banking and Finance to come to the fore. With the global economy having reached a critical state, this sector has seen mayhem and meltdown. The need to manage redundancies, redeployment, acquisitions and mergers, plummeting salaries and bonuses, disciplinarians, declining staff morale, stress and anxiety, and major changes in business practice, makes the most extreme demands on the full range of HR skills and specialisms. In recent years, financial institutions have experienced a dynamic and competitive environment. Competition at a cross-border scale make local institutions adjust their competitive position to sustain their financial performance. The banking industry is one of the most knowledge-intensive industries. Intellectual Capital (IC) generally represents the critical resource in the value creation process.

HR managers today became more involved in partnering with their top managers in both designing and implementing their strategies that will be achieved through people. Top management wants to see how the HR plans will make the company more valuable through improved performance. Effective human resources are considered a key to the sustainability of all businesses successes. HR managers are thus accurately concerned by their challenges in recruiting, training, and developing the suitable personnel who best serve the organizational objectives. The global financial crisis certainly drove dramatic change in the industry. In particular, companies are more focused on how they manage change. Many executives face the challenge of leading their employees through significant organizational restructuring or strategic realignmenta task that requires knowledge of human capital management best practices. HRM includes the following functions:
1. Human Resource Planning

2. Human Resource Policies 3. Recruitment and Selection 4. Salary, Benefits and Incentives

5. Performance Management 6. Training and Development These functional responsibilities are influenced by the external context in which the MFI operates and well as the MFIs internal strategies, goals, mission, and institutional culture. It is also important to include a process of review and evaluation to ensure that the systems and tools continue to be appropriate as your MFI evolves. Each of the six HR functions plays an important role in the effective operations of the MFI. All employees, regardless of their position in MFI, need the same things to be successful. Everyone needs to: 1. Identify with the MFIs mission 2. Understand their role, and how that contributes to the mission 3. Know specifically what is expected of them 4. Have the capacity, resources, and environment which make success possible 5. Receive encouragement, constructive feedback, and opportunities to develop and improve.

RECRUITMENT, SELECTION Recruitment is the search for qualified applicants and selection is the evaluation and decision of which candidate is the best match for the job and the institution. The whole process begins with identifying the needs and ends of the firm with negotiating the final offer with the candidate and making the hire. Institutions are successful because of their people both past and present. Critical to its future success is the quality of the people the MFI can attract/recruit. Hiring the right person has tremendous benefits. The right person is someone who is well matched to the job tasks and the institutions values and goals. If a person is a "good fit", they will demonstrate high levels of initiative and creativity; they will be productive and likely stay with the MFI.

INDUCTION Induction is the process for introducing a new employee to their work environment. It extends from the moment the prospective employee reads the advertisement for the position and fuses with their training and development as a part of the organisation.

NEED OF AN INDUCTION PROCEDURE A proper induction will give both the employees and the organisation the following benefits: It improves the motivation of new employees by helping them quickly assimilate the

workplace culture, as well as their knowledge of the products/services provided by the organisation and the systems in place. This in turn boosts confidence and improves work quality and productivity, as well as helping to reduce incidences of early leaving, which can be extremely costly to the organisation. As induction involves other staff other than the inductee, the process can also be useful in developing the skills of existing staff. As well as these benefits induction can ensure that health and safety rules are properly disseminated to all staff and a good induction will help with an investment in People application. GENERAL OBJECTIVES OF INDUCTION PROCESS Build confidence about self and BENEFICIARIES OF INDUCTION PROCESS An induction process is not simply for new employees. The same benefits can be received by staff who have been promoted or transferred or those who have returned from a long period of absence. Furthermore one should be careful to include against long term temporary staff, which is entitled to the same training and development as permanent staff members.

FEATURES OF INDUCTION TRAINING To make the training effective it should be 1. Flexible and interesting; 2. Employee centred 3. Meets equal opportunities requirements. 4. Involves all business units

OBJECTIVES OF INDUCTION PROCESS 1. Build confidence about self and the organisation within the new employee is one of the major objectives of the induction. This will help the employee who was recruited recently to become a productive one by reducing his/her anxiety that impedes ability to learn to do the job. 2. Create the feeling of belongings and loyalty within the new employee is another objective of induction. This is also called as socialisation. Some new employees tend to be afraid of new environment, new rules and regulations of the organisation and these employees are likely to settle in more quickly and enjoy working for the organisation if the process of

socialisation takes place smoothly. The social aspects of work relationships with colleagues are very import for many people. The extent to which employees can directly influence the quality of socialisation may often be limited, but it is a feature of introduction to the organisation to which they should pay attention as far as this is possible during the induction arrangements described below which are concerned with reception documentation initial briefing introduction to the work place formal induction courses and formal and informal training activities. Generate favourable attitudes within the new employee about peers, superiors, subordinates and the organisation in general is another objective. Attitude is the basic thing that can change the behaviour of a person. If the person develop good attitude he/she will be a valuable person to the organisation and the person like that tends to work sincerely for the betterment of the organisation not only in the department allotted to him but also in all the places where he can do some kind of contribution. This attitude will help him to built good team spirit in the organisation. Knowledge transfer: By formalising knowledge transfer, or providing a more rigorous framework for informal transfers, new starters can be provided with the information they need to conduct their work.

ROLES OF OTHER PEOPLE IN INDUCTION It is not sufficient to simply present a new staff member with a file of information and told to get on with it. An induction process should involve other employees, helping build relationships within the organisation. The following people may well be involved in the process. The employees Line Manager has the primary responsibility to identify the needs of the inductee and assess their learning styles as well as ensuring that the programme is followed through. The Training/personnel dept, or whoever is responsible for training, needs to advise line managers, ensure training is provided, manage group events and oversee delivery of the programme. Senior Managers, including the trustees, should be available to set out the vision of the organisation to new employees. Their involvement can help to motivate inductees by

demonstrating the organisations concern that new employees feel they are an important part of the organisation. It will also help inductees see the big picture in which their work takes place. Specialists can provide specialist information on topics such as Health and Safety, quality measures, union representation etc. Nominated peer can provide informal support and accelerate assimilation into the team/department by offering advice and information as needed. Meeting Customers/suppliers/distributors can help the inductee understand his/her role in relation to these outside groups and the importance of their own role in linking with them.

STAGES OF INDUCTION Induction does not simply begin and end on an employees first day at work. Proper induction starts from the moment the need for recruitment is identified and carries on throughout the first year, blending into the organisations programme of staff training and development. Job advert The advert should be realistic, with a design and copy that reflects the culture of the organisation. The emphasis for the advert should be on the aspects of the work that current employees find satisfying and it must be accurate about pay, conditions and any special conditions that apply. A proper job advertisement will begin the selection procedure to ensure the most suitable person is chosen. Application pack This should provide literature about the organisation (Q&As, who we are, what we have achieved, what it is like to work here, where we are, local facilities), a suitable job description and a brief outline of the terms and conditions. Where there are conditions that are not part of the contract, i.e. a no-smoking policy, then these should be properly marked. Pre-employment handbook This can take the form of an actual handbook, or simply an introductory letter to the successful candidate. The important points are that it should be friendly and jargon free. It should set out the arrangements for the first day The time and place the employee should arrive, Parking/transport arrangements at site

The name of the person who will meet them/whom they should ask for What type of clothing should be worn (dress code, safety clothing etc) Any specific security arrangements they should be aware of The catering facilities that are on site/near by, A list of the documents they will need to bring on the first day An outline of the work of the first day.

The pre-employment pack/letter should enable the employee to predict exactly what will happen on their first day, which in turn will do a great deal to reassure and overcome apprehension. If an inductee can go home at the end of the first day and say that the day was as expected, the pre-employment material will have been successful. Primary induction- This is the first face-to-face induction the inductee will have as an employee of the company. It should address both the inductees and the employers immediate needs and priorities such as; 1. Health and Safety, 2. Conveniences, 3. Personal details- the following is a list of information that may be needed a. Driving license b. Car insurance c. Birth certificate d. Passport e. Previous employment details f. 1st aid certificate g. Medical documents if a health check is to be carried out 4. Details of the next of kin. 5. Important documents the employee needs to receive from the organisationa. Employee handbook b. ID c. Safety rules d. Clocking in card e. Locker key f. Vending/restaurant tokens

g. Car park entry h. Authority to draw protective clothing i. Documents for company car. By the end of day the inductee should know; 1. The location of work site, toilets and facilities, 2. Time-recording procedure, 3. Rest/meal break times, 4. Health and Safety rules, 5. Location of their personal work station, 6. Rules about PC/phone use, 7. Key points of conduct 8. Have been introduced to their immediate supervisors and colleagues.

To make sure that the induction programme finds the result it should be delivered with the help of some techniques. The techniques are: Have everything set out on paper, including the names of the people the inductee is to meet, and send the inductee a timetable of the first day, as part of their pre-employment pack. Nominate a key person who is responsible for each task that the inductee will have to do and make sure they are prepared and trained to do it. Ensure that the people who are to meet the inductee are available, punctual and friendly. Once the primary induction is finished, the employee will still need to be inducted into the culture and systems of the organisation and given training to allow them to complete their work.

MAIN INDUCTION PROCESS

Ideally this should start in the first week, but again be careful to avoid overload. Rather than seeing induction as happening on one day, see it as a yearlong procedure that merges with training programme of the organisation.

When planning the induction programme, the trainer should consider three broad topics with which he want the employee to be familiar: Work environment- Health and Safety issues, Employee welfare, work hazards and preventative measures The organisation- A structured view of the organisation should be given through providing mission statements and business plans and explaining communication and involvement systems that show; How employees fit in the organisation through organisational charts, accountability charts and meeting people. The roles and culture within the organisation through explaining policies and meeting people. Job instruction- Explained by the line manager through the job description, setting targets and performance measurements and explaining the value and importance of the work, as well as ensuring the inductee receives the relevant training to actually carry out the work. As with all training it is essential for the employer to review and evaluate the process.

EVALUATING INDUCTION

Primary Evaluation - The reaction, learning and behaviour of the inductee and how well these match up to the objectives of the induction. Secondary Evaluation - The effects of the induction on the organisation in terms of staff retention, attendance, flexibility, equal opportunities, health and safety and customer care. Induction programmes, as with any training, should be modified according to the results of the evaluation. BUILDING AN INDUCTION PROGRAMME

The key people involved in training and supporting the proposed employee need to meet (i.e the directors/trustees/line managers/personnel department) to discuss exactly what the

organisation and its environment expect the induction to achieve and their expectations having written the job description and person specification.

Some questions that should be asked are;

At the end of the first week1. What does a new employee need to have known? 2. What key policies and procedure do we need to have conveyed to the new employee? 3. What positive behaviours do we want to have reinforced? 4. What should we have done to help integrate the new employee into the team/department? 5. How can we have given the employee a sense of accomplishment? 6. What feedback will the new employee need? 7. Will we have made ourselves sufficiently accessible?

It is important to design some tasks that the employee can achieve during their first week. These should give them the feeling that they have started work otherwise they may feel bored and detached if they are simply receiving training and information and also give them a sense of accomplishment, so should have an easily achievable end. This will in turn reinforce their motivation to the organisation and wanting to stay a part of it. At the end of the first month1. What additional things does the employee need to have known? 2. What policies/procedures need to have been in place to affect job performance? 3. What impressions or models should we want to have been reinforced in this month? 4. What task can we assign the employee that allows for growth over this month? 5. What can our organisation do to broaden delegation to include the employee? 6. What training objectives do we want the employee and the organisation to meet?

As induction goes forward the following questions shall be answered 1. What info did you need in the first 6 months that you did not receive?

2. What tools and information were or would be helpful in the first 6 months? 3. What changes would you make to induction?

At one year1. What additional things does the employee need to know by the end of the 1st year? 2. What policies/procedures need to be in place and aware of to affect job performance? 3. How can we have encouraged the employee to be self-sufficient over the year and in the future? 4. Does the employee have capabilities/skills that arent being utilised? 5. How well have we met our goals?

a checklist shall be made that states; What task is to be done, By whom, By when, How long will it take to do and a A check box for the employee and person responsible to say it has been done.

This checklist should be given to the employee and they should regularly update it accordingly. As it is completed copies can be put in the employees personnel file. 8 ESSENTIAL INDUCTION TIPS FOR NEW RECRUITS 1. Start inducting the new employee before they start their job. Send a letter welcoming them to the company. Let them know what is expected of them in their role and the steps involved with their induction process, so they know what to expect on their first day. 2. Make new starters feel welcome. First impressions arent easy to erase. Take them on a personalized tour of the company and introduce them to everyone. Encourage other staff to be friendly to new workers. Spend extra time introducing them to their new team members. Assign them to a mentor or peer. The best inductors also have the CEO or other senior person take the new starter out to lunch in their first month. 3. Have their workspace ready. This includes a desk, a computer with personalized logon information, telephone which will improve their ability to be productive.

4. All HR forms, policies and procedures are ready. Administration tasks that are required by HR are ready to go and help is given to the new starter with filling this out. Ideally, before they start their job new starters are told what information they need to bring in (eg: tax file numbers, bank account details etc). 5. Have their direct supervisor available. Care is taken so that their direct supervisor is available on their first day to make them feel valued as an important addition to the team. This is the same with the mentor or buddy. 6. Provide visually engaging induction training. Avoid sitting the new starter down with a big, boring manual to read on their own. The best induction training programs are structured and include a face to face component, vivid presentation techniques (photos, diagrams, videos and lots of colour), assessment and senior management involvement. Ensure they are not overwhelmed with too much information. 7. Communicate company core values. Great companies start aligning their core values and culture on the newbie from Day 1. While part of the induction training and mentor/buddy effort, pains are made to get the new starter living and breathing company core values as quickly as possible. 8. Train the trainer: ensure that those involved in the process have been trained and know what is required of them. Make sure they are able to communicate the companys core values and have the knowledge to answer questions.

LATEST TRENDS IN INDUCTION PROGRAMME A traditional induction program takes place on the first day at work or in few days after joining the firm. This method has been criticised because it includes only dumping of paper knowledge to the employees. And thus many human resource management professionals tried to make some difference and improvement to this method because the impact of induction is expected to stay longer than earlier. Jan Torrisi Mokwa , Director of human resource at Aurtur Andersen discovered many new techniques for induction. This includes latest trend in induction program in which the photograph of new employees are circulated among the existing employees to find common interest among them and new faces and also to identify any familiar faces among new comers.

Technological advancement allows an orientation timeline to start induction even before the employee join regularly in the firm. This includes programs that allow the employee to finish paper work while being at home with support and guidance of family members so as to allow them to reduce the tension of heavy paper work at the first day at office. This software can also carry a presentation or a video about the company as they can familiarise about the firm before the actually step into the firm. This shall also contain essential details peers mentor at firm senior officers etc with which the employee can contact them and establish a relationship before he enters the firm. Some firms conduct the induction program with a theme. This theme shall be related to business or its core values or concepts. Everything in that induction program shall revolve around that theme viz presentations, speeches, videos, debate, food served, dress code etc. NEW JOB REMORSE Remorse is that feeling of attachment to something which a person owns and which prevents him from loosing or giving up that possession. Some firms stays successful in identifying something in an employees life at that firm because of which he will think twice to leave that firm. This is called as new job remorse. An effective new employee induction identifies the theme or emotion and works to create dynamic and motivating atmosphere which will help the new entrants in developing a feeling of confidence that they have made the right choice in joining the firm. SELF DIRECTED INDUCTION MODULE Many firms do not have time or enough resources to conduct a face to face or trainer facilitated induction programme. In that case they implement self directed induction module which is pre packaged but fully customisable, booklet based program called as Getting in Gear. It includes a series of 30 self directed learning assignments organised into 5 modules. These modules are to be completed by the employees by one on one superior meeting scheduled between each modules for additional learning and to review employees progress during induction period. This type of induction needs no computers, training panel and also the employee is expected to complete the assignments while at job. After completion of one assignment and before starting the new one the employee will have to attend six pre programmed meetings with team leader/ supervisor/ manager. These meetings will be a session for reviewing the employee that he has done the previous session successfully.

RECOMMENDED USERS This method can be used in any firm but preferably used for employees at: Remote branches away from corporate offices induction centre. Companies that hire very few employees every year that they find it out of sense to conduct a full time induction camp with outside trainer. Companies which believe in on the job training. For employees who do not have easy access to computers. Those who need much time to learn things. ORIENTATION AT MULTIPLE LEVELS Wyndham International has developed a new employee induction program called Beginnings which is a three phased process comprised of instructor led workshop, one-on one meetings and self study designed to orient the employee to the company, to their job, and location. The employees receive a handbook before induction with all required data. INDUCTION FOR NEW MANAGERS Some organisations give induction to employees at managerial level. This tends to be quite formal and thus includes study or discussion on the following: Companys mission statement Companys vision statement Company strategies and goals The company history Organisational charts Lunch with company leaders. Parent company information Company subsidiary information Recognition and reward system Companys leadership competencies. Company values Companys products and services. Companys customers Companys marketing plan

Competitors. Companys growth, present and future. Company patents. Rules and regulations and legal framework under which the firm functions. SCAVENGER HUNT New employees are given a handout with some questions related to the firm and their position in the organisation. And the employees are expected to return with answer in a specific time period. This game will help the employees to find the data related to the firm by them self and also to come in contact with some employees. BENEFITS OF INDUCTION TRAINING Benefits to the Employee A good induction and training program will leave the employee feeling empowered and a full part of the team. It will help them to fit in, and understand the company. You dont need to sell the company to the employee they have already accepted the job (therefore, have chosen the company). By conducting a good induction / orientation, you have a new employee who finds their way around faster, and who will feel that they are valued. Good staff training, where their previous knowledge is taken into account, makes the employee feel good. If you try to teach them what they already know, they feel like their knowledge is not valued, and feel demeaned. The purpose of an Induction and Training program is to reinforce the employees initial feelings of wanting to work there, and to ensure that they become an integrated and productive team member, who will stay for the long term. Benefits to the Manager & Work Team You will be building on the fact that you have hired somebody who can already do the tasks, and all they need to know is how your systems work.

By starting with this premise, your new employee becomes productive faster and has a positive attitude towards working with the team, and in how their skills and prior experience is valued by both the team and the Company. Benefits to the Organisation By having a good induction and staff training program, you will acquire loyal employees who feel integrated into the culture of the company and who are likely to be more productive and stay with the company longer. CONCLUSION Induction is the first meeting that a new employee attends at his new workplace and so this has to be of that standard and to the objective so that the new entrants feels motivated and comfortable to go ahead.