CHAPTER

TITLE

PAGE

INTRODUCTION

REVIEW OF LITERATURE II

ANALYSIS AND INTERPRETATION OF DATA III

IV

CONCLUSION

BIBLIOGRAPHY APPENDIX

CHAPTER I INTRODUCTION

INTRODUCTION The nature of equity market in India has undergone profound change over the last 20 years. This effects the trend of capital market. The significant developments include the introduction of screen-based electronic trading platforms and the dematerialization of shares and shareholding. These developments have permitted the implementation of a straight-throughprocessing settlement as well as enabling risk management to develop the very sophisticated automatic mechanisms. The capability and efficiency of trading and settling large volumes of shares through this streamlined process have made Indias financial markets significantly more attractive to global investors. The Indian stock and investment market is mainly divided into two parts, namely the capital market and the money market. The stock market is an important part of the capital market in the country through which one can carry out the transaction of capital. It is usually done through the means of direct financing by security and investment. The investment markets classically classified as Primary market and Secondary market. Primary Market In case of the primary market, the listed shares are traded for the first time which is transferred to the investors from the listed company. In case of the primary market, the stock issuers and the listed companies make use of the capital by offering the stocks to the investors. The investors, in turn, buy the shares and supply the needed capital. In simple terms, the primary market is a type of platform where new securities and stocks are dealt with. The primary market can be an ideal source of funding for various business enterprises and companies, public sector units and government organizations. All these organizations can make the funding by selling new bonds, stocks and other forms of securities. The buying and selling of the securities are done through dealers. Secondary Market An important part of the Indian stock and investment market is the secondary market. In simple terms, it is also known as the stock market. Mainly it is a type of continuous market which offers a very good platform for trading and business of securities and stocks. In most cases, the trading is done through a licensed broker, stock and securities units, security firms and other financial institutions. The trading has to be done according to the terms and conditions that are set by the specific stock exchanges.

PRICE BEHAVIOUR The analysis related to fundamental and technical aspects help the investor in evaluating securities individually and select them for suitable investment decisions. While fundamental analysis depends on economic, industry and company factors in evaluating a securitys worth, technical analysis looks at past price movements to evaluate securities. Hence the market prices of securities can be said to be determined by several other factors besides the demand supply forces. The inferences of all information available in the market, if quantified accurately, should help in predicting the expected price of securities in the market. A capital depends, to a large extent, on information, both external and internal, in determining the value of securities that are traded on a day to day basis. The market can be said to be efficient if it does not let any one player in the capital market to profit abnormally from certain information. NEED OF STUDY The need of this selected study is to know the price trend of the commercial bank securities. The study is about selected bank securities, which are actively operating in the share market. The important factors which affect the commercial banks securities in stock market are considered The analysis the past price trend of that commercial banks securities.

SCOPE OF THE STUDY The study on trend The price trend of commercial bank securities in stock market course only the securities listed in NSE only. In NSE there are 10 banks listed in stock market. So the statement of problem is that this study analyses the price behavior of that listed 10 banks securities. And to also know the book value and the price earnings ratio of the securities. To examine those securities book value and price earnings ratio quarterly data of the selected bank securities in NSE will be collected and book value of bank securities will be correlated with price movements and P/E ratio will be analyzed. The price earnings ratio is an indicator to know the overvaluation and undervaluation of those securities. This ratio shows the relationship between earning share and market value of the selected securities listed in NSE. This comparison of these ratios shows whether there is speculation in these bank securities.

OBJECTIVES OF THE STUDY The major objectives of the study are To study the price trend of selected commercial banks securities listed in NSE from 1st January 2007 to December 31st 2009. To examine the relationship between book value and price earnings ratio of selected bank securities listed in NSE.

METHODOLOGY This project work concentrates on 10 bank securities. The 10 bank securities are taken during the period of 1st January 2007 to 31st December 2009. Data collection These 12 bank securities closing price and index details are collected from the NSE web site. Major Data No of bank securities Closing index Closing price The following methods are followed for analyzing the data. 1. Moving Average

Moving Averages are indicators of the underlying trends of the price movement. Two types of Moving Averages (MA) are commonly used by analysts They are the Simple Moving Average(SMA) and the Exponential Moving Average(EMA). a) Simple Moving Average

An average is the sum of a share price for a specific number of days divided by the number of days. In a simple moving average, a set of averages are calculated for a specific number of days, each average being calculated by including a new price and excluding an old price.

b)

Exponential Moving Average

EMA is a type of moving average that is similar to a simple moving average, except that more weight is given to the latest data. The exponential moving average is also known as "exponentially weighted moving average". Moving Average Convergence and Divergence(MACD) is calculated on the basis of two exponential Moving Averages. This trend shares the relationship between average of prices. 2. KARL PEARSONS Coefficient of Correlation

KARL PEARSONS Coefficient of Correlation method is used to find out whether the index price and the closing price of securities are related. 3. Calculation of Price Earnings Ratio

The calculation of Price Earnings ratio is by taking three years financial data of 10 bank securities of NSE i.e., the Earnings per share and Market per share

OVERVIEW OF STOCK MARKET A stock market / share market is a public market for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately. The size of the world stock market was estimated at about $36.6 trillion US at the beginning of October 2008.[1] The total world derivatives market has been estimated at about $791 trillion face or nominal value, [2] 11 times the size of the entire world economy. [3] The value of the derivatives market, because it is stated in terms of notional values, cannot be directly compared to a stock or a fixed income security, which traditionally refers to an actual value. Market participants A few decades ago, worldwide, buyers and sellers were individual investors, such as wealthy businessmen, with long family histories to particular corporations. Over time, markets have become more "institutionalized"; buyers and sellers are largely institutions (e.g., pension funds, insurance companies, mutual funds, index funds, exchange-traded funds, hedge funds, investor groups, banks and various other financial institutions). The rise of the institutional investor has brought with it some improvements in market operations. Thus, the government was responsible for "fixed" fees being markedly reduced for the 'small' investor, but only after the large institutions had managed to break the brokers' solid front on fees. However, corporate governance has been very much adversely affected by the rise of institutional 'owners'.

Stock market index The movements of the prices in a market or section of a market are captured in price indices called stock market indices, of which there are many, e.g., the S&P, the FTSE and the Euro next indices. Such indices are usually market capitalization weighted, with the weights reflecting the contribution of the stock to the index. The constituents of the index are reviewed frequently to include/exclude stocks in order to reflect the changing business environment. Derivative instruments Financial innovation has brought many new financial instruments whose pay-offs or values depend on the prices of stocks. Some examples are exchange-traded funds (ETFs), stock index and stock options, equity swaps, single-stock futures, and stock index futures. These last two may be traded on futures exchanges (which are distinct from stock exchangestheir history traces back to commodities futures exchanges), or traded overthe-counter. As all of these products are only derived from stocks, they are sometimes considered to be traded in a (hypothetical) derivatives market, rather than the (hypothetical) stock market. STOCK EXCHANGES IN INDIA Stock Exchanges provide an organized market for transactions in shares and other securities. As of 2003, there are 23 stock exchanges in the country, 20 of them regional ones with allocated areas of operation. Of the 9855 or so public companies that have listed their shares in stock exchanges, around500 account for 99.6 per cent of the trading turnover, nearly all of which is on the primary exchanges i.e. Bombay stock exchange and National stock exchange. The Bombay stock exchange and National stock exchange together account for nearly 72 per cent of all capital market activity in India. The other major exchanges are the Calcutta, Delhi, and Ahmadabad. The remaining exchanges account for only 4 per cent of the Indian capital market activity.

National Stock Exchange of India The National Stock Exchange of India Limited is a Mumbai-based stock exchange. It is the largest stock exchange in India in terms of daily turnover and number of trades, for both equities and derivative trading.[1]. NSE has a market capitalization of around Rs 47, 01,923 corer (7 August 2009) and is expected to become the biggest stock exchange in

India in terms of market capitalization by 2009 end.[2]Though a number of other exchanges exist, NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India, and between them are responsible for the vast majority of share transactions. The NSE's key index is the S&P CNX Nifty, known as the Nifty, an index of fifty major stocks weighted by market capitalization. NSE is mutually-owned by a set of leading financial institutions, banks, insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities. There are at least 2 foreign investors NYSE Euro next and Goldman Sachs who have taken a stake in the NSE.[4] As of 2006, the NSE VSAT terminals, 2799 in total, cover more than 1500 cities across India [5]. In October 2007, the equity market capitalization of the companies listed on the NSE was US$ 1.46 trillion, making it the second largest stock exchange in South Asia. NSE is the third largest Stock Exchange in the world in terms of the number of trades in equities. It is the second fastest growing stock exchange in the world with a recorded growth of 16.6%. Origins The National Stock Exchange of India 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. In April 1993, it was recognized as a stock exchange under the Securities Contracts (Regulation) Act, 1956. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment of the NSE commenced operations in November 1994, while operations in the Derivatives segment commenced in June 2000. Markets Currently, NSE has the following major segments of the capital market: Equity Futures and Options Retail Debt Market Wholesale Debt Market Currency futures

NSE became the first stock exchange to get approval for Interest rate futures as recommended by SEBI-RBI committee, on 31 August,2009, a futures contract based on 7% 10 Year GOI bond (NOTIONAL) was launched with quarterly maturities.

Indices NSE also set up as index services firm known as India Index Services & Products Limited (IISL) and has launched several stock indices, including . S&P CNX Nifty(Standard & Poor's CRISIL NSE Index) CNX Nifty Junior CNX 100 (= S&P CNX Nifty + CNX Nifty Junior) S&P CNX 500 (= CNX 100 + 400 major players across 72 industries) CNX Midcap (introduced on 18 July 2005 replacing CNX Midcap 200)

CNX Bank Index The Indian banking Industry has been undergoing major changes, reflecting a number of underlying developments. Advancement in communication and information technology has facilitated growth in internet-banking, ATM Network, Electronic transfer of funds and quick dissemination of information. Structural reforms in the banking sector have improved the health of the banking sector. The reforms recently introduced include the enactment of the Securitization Act to step up loan recoveries, In order to have a good benchmark of the Indian banking sector, India Index Service and Product Limited (IISL) has developed the CNX Bank Index. CNX Bank Index is an index comprised of the most liquid and large capitalized Indian Banking stocks. It provides investors and market intermediaries with a benchmark that captures the capital market performance of Indian Banks. The index will have 12 stocks from the banking sector which trade on the National Stock Exchange. The total traded value for the last six months of CNX Bank Index stocks is approximately 96.46% of the traded value of the banking sector. CNX Bank Index stocks represent about 87.24% of the total market capitalization of the banking sector as on March 31, 2009. The total traded value for the last six months of all the CNX Bank Index constituents is approximately 15.26% of the traded value of all stocks on the NSE. CNX Bank Index constituents represent about 7.74% of the total market capitalization as on March 31, 2009. Methodology The index is a market capitalization weighted index with base date of January 01, 2000, indexed to a base value of 1000.

Selection Criteria Selection of the index set is based on the following criteria 1. 2. 3. 4. 5. Company's market capitalization rank in the universe should be less than 500 Company's turnover rank in the universe should be less than 500 Company's trading frequency should be at least 90% in the last six months. Company should have a positive net worth. A company which comes out with a IPO will be eligible for inclusion in the index, if it fulfills the normal eligibility criteria for the index for a 3 month period instead of a 6 month period.

Constituents list of selected CNX Bank The following are the constituents list on CNX Bank index in NSE State Bank of India Bank of Baroda Bank of India Canara Bank Union Bank of India Axis Bank Ltd HDFC Bank Ltd. ICICI Bank Ltd IDBI Bank Ltd Kotak Mahindra Bank Ltd Bombay Stock Exchange

The Bombay Stock Exchange Limited is the oldest stock exchange in Asia and has the greatest number of listed companies in the world, with 4700 listed as of August 2007.[1] It is located at Dalal Street, Mumbai, India. On 31 December 2007, the equity market capitalization of the companies listed on the BSE was US$ 1.79 trillion, making it the largest stock exchange in South Asia and the 12th largest in the world.[2] With over 4700 Indian companies listed & over 7700 scripts on the stock exchange,[3] it has a significant trading volume. The BSE SENSEX (sensitive index), also called the "BSE 30", is a widely used market index in India and Asia. Though many other exchanges exist, BSE and the National Stock Exchange of India account for most of the trading in shares in India.

BSE indices For the premier stock exchange that pioneered the securities transaction business in India, over a century of experience is a proud achievement. A lot has changed since 1875 when 318 persons by paying a then princely amount of Re. 1, became members of what today is called Bombay Stock Exchange Limited (BSE). BSE, in 1986, came out with a Stock Index-SENSEX- that subsequently became the barometer of the Indian stock marke The launch of SENSEX in 1986 was later followed up in January 1989 by introduction of BSE National Index (Base: 1983-84 = 100). It comprised 100 stocks listed at five major stock exchanges in India - Mumbai, Calcutta, Delhi, Ahmedabad and Madras. The BSE National Index was renamed BSE-100 Index from October 14, 1996 and since then, it is being calculated taking into consideration only the prices of stocks listed at BSE. BSE launched the dollar-linked version of BSE100 index on May 22, 2006. With a view to provide a better representation of the increasing number of listed companies, larger market capitalization and the new industry sectors, BSE launched on 27th May, 1994 two new index series viz., the 'BSE-200' and the 'DOLLEX-200'. Since then, BSE has come a long way in attuning itself to the varied needs of investors and market participants. In order to fulfill the need for still broader, segment-specific and sector-specific indices, BSE has continuously been increasing the range of its indices. BSE disseminates information on the Price-Earnings Ratio, the Price to Book Value Ratio and the Dividend Yield Percentage on day-to-day basis of all its major indices.

The values of all BSE indices are updated on real time basis during market hours and displayed through the BOLT system, BSE website and news wire agencies.

All BSE Indices are reviewed periodically by the BSE Index Committee. This Committee which comprises eminent independent finance professionals frames the broad policy guidelines for the development and maintenance of all BSE indices. The BSE Index Cell carries out the day-to-day maintenance of all indices and conducts research on development of new indices. OVERVIEW OF BANKING SECTOR Banking in India originated in the last decades of the 18th century. The oldest bank in existence in India is the State Bank of India, a government-owned bank that traces its origins back to June 1806 and that is the largest commercial bank in the country. Central banking is the responsibility of the Reserve Bank of India, which in 1935 formally took over these responsibilities from the then Imperial Bank of India, relegating it to commercial banking functions. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers. In 1969 the government nationalized the 14 largest commercial banks; the government nationalized the six next largest in 1980. Currently, India has 96 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake), 31 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively. Nationalization By the 1960s, the Indian banking industry had become an important tool to facilitate the development of the Indian economy. At the same time, it had emerged as a large employer, and a debate had ensued about the possibility to nationalize the banking industry. Indira Gandhi, the-then Prime Minister of India expressed the intention of the GOI in the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalization." Thereafter, her move was swift and sudden, and the GOI issued an ordinance and nationalized the 14 largest commercial banks with effect from the midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies and Transfer of Bill, and it received the presidential approval on 9 August 1969.

A second dose of nationalization of 6 more commercial banks followed in 1980. The stated reason for the nationalization was to give the government more control of credit delivery. With the second dose of nationalization, the GOI controlled around 91% of the banking business of India. Later on, in the year 1993, the government merged New Bank of India with Punjab National Bank. It was the only merger between nationalized banks and resulted in the reduction of the number of nationalized banks from 20 to 19. After this, until the 1990s, the nationalized banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy.

Liberalization In the early 1990s, the then Narsimha Rao government embarked on a policy of liberalization, licensing a small number of private banks. These came to be known as New Generation tech-savvy banks, and included Global Trust Bank (the first of such new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, Axis Bank(earlier as UTI Bank), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of India, revitalized the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks. The next stage for the Indian banking has been setup with the proposed relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%,at present it has gone up to 74% with some restrictions. The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-6-4 method (Borrow at 4%;Lend at 6%;Go home at 4) of functioning. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks.All this led to the retail boom in India. People not just demanded more from their banks but also received more. Currently (2007), banking in India is generally fairly mature in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly been true.

With the growth in the Indian economy expected to be strong for quite some time-especially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. One may also expect M&As, takeovers, and asset sales. In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has been allowed to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by them. In recent years critics have charged that the non-government owned banks are too aggressive in their loan recovery efforts in connection with housing, vehicle and personal loans. There are press reports that the banks' loan recovery efforts have driven defaulting borrowers to suicide. INVESTMENT OPPORTUNITIES TO INVESTORS The three important characteristics of any financial asset are: Return the potential return possible from an asset. Risk the variability in returns of an asset from the chances of its value going down/up Liquidity the case with which an asset can be converted into cash. Investors tend to look at these three characteristics while deciding on their individual preference pattern of investment. Each financial asset wills a have a certain level of each of these characteristics. These, in some way, determine the type of financial asset.

Based on the preferred risk, return, and liquidity, each investor selects an investment that matches his investment objective. The investment pattern of the household sector in India gives a glimpse of the investment preference. The savings pattern of the household sector in India can be differentiated in terms of currency; fixed/savings instruments such as deposits, insurance/provident funds and small savings; and securities market investment through mutual funds, government securities, and other direct corporate investments. INVESTMENT AVENUES

There are a large number of investment avenues for savers in India. Some of them are marketable and liquid, while others are non-marketable. Some of them are highly risky while some others are almost riskless. The investor has to choose proper avenues from among them, depending on his specific need, risk preference, and return expectation. Investment avenues can be broadly categorized under the following heads: Corporate Securities Equity shares Debentures/Bonds Warrants Preference shares GDRs/ADRs Derivatives Deposits in banks and non-banking companies Post office deposits and certificates Life insurance policies Provident fund schemes Government and semi-government securities Mutual fund schemes Real assets

LIMITATIONS The study is confined to only the selected commercial banks securities in listed in NSE. The study is based on published data only. The result of the study cannot be generalized.

CHAPTER SCHEME Chapter I Introduction The this chapter would deal with the scope and significances of the theme; an introduction on stocks and stock market; an overview of stock market and banking sectors and investment opportunities available to investors and the brief study of price trend in the stock market.

Chapter II
Review of Literature In this chapter, the reviews and the researches done by few authors on the related topics are abstracted as reference Chapter III Analysis and interpretation This chapter deals with the analysis regarding index price and closing price of bank securities and also 10-bank securities closing price are correlated with the index. A study of a correlation between price earnings ratio and banks book value. Chapter IV Findings, Suggestions and conclusion are presented in this chapter

CHAPTER II REVIEWS OF LITERATURE

REVIEWS OF LETERATURE I. In thE paper Modeling stock price behavior by financial ratios 1 the author Teppo Martikainen purpose of this study is to find out which economic dimensions of the firm are reflected in stock price behavior in the Finnish stock market. Twelve (10) financial ratios are then selected to represent these four dimensions. All the firms common series listed for the whole 19741986 period are included in the empirical analysis. All of the dimensions above are found in the empirical classification pattern of ratios. On the cross-sectional level, profitability and financial leverage are reported as determinants of stock price behavior. Corporation growth is merely connected to the risk of the common stock. Somewhat weaker results concerning the association between stock price behaviors and operating leverage factor may be due to difficulties measuring operating leverage on an empirical level. When studying the intra-year explanatory power of financial ratios, it is reported that the explanatory power of financial ratios tends to increase when the reporting day approaches, and starts to decrease after that releasing day of financial statement numbers. Empirical evidence strongly indicates that financial ratios represent pricing relationships in a substantive manner. The financial support by the Academy of Finland as well as the helpful comments and suggestions of an anonymous referee are gratefully acknowledged. II. In thE paper Empirical Tests on the Stock Price trend of Privatized Enterprises 2 the authors C. A. Alexakis, M. C. Kolomitsini, M. Cantharis examines the offer of shares to the public, via the primary market of the stock exchange, is considered an efficient way to privatize state owned companies. During the last decades, Greece went through a privatization program and a number of state owned enterprises were listed on the Athens Stock Exchange. In this paper, theystudy the price behavior of newly listed Greek privatized companies, using data from 18 new issues over the period 1988- 2006. 1.Modeling stock price behavior by financial ratios by Teppo Martikainen, journaldecisions in economics and finance, publisher-springer Milan, issue-volume 12,number 1/marc

First, they examine if the market participants react to the listing price by buying or selling significantly higher or lower; second, they test if the Greek market operates in accordance to the prediction of the Efficient Market Hypothesis for instantaneous price adjustment. From thar analysis we obtained strong statistical evidence that the majority of the companies under examination traded at a price not significantly different than the listing price; and the market behaved according to the predictions of the Efficient Market Hypothesis. III. In the paper Price trend of New Share Listings 3 the authors Olatunde Otaniyi, Daniel Makina investigates whether new listings on the Nigerian Stock Exchange are under-priced or not. On aggregate, they find that investors are able to make abnormal gains from new listings on the first tier (main) market of the Nigerian Stock Exchange (NSE).ther analyses show that up to one year after listing the average differences of real share prices are positively significant to confirm the observation. The situation is however different in the second (emerging) tier market. Ther analyses show that the real prices of newly listed shares in the second tier market do fall. Such an observation could, however, be attributed When ther thin trading of shares which phenomenon is characteristic of second tier markets. e partition the data into pre-and post-deregulation periods, we observe under- pricing of new equity listings to have been severe during the pre-deregulation period, and hence more opportunity for abnormal gains. 2-Empirical Tests on the Stock Price trend of Privatized Enterprises in Greece by C. A. Alexakis Assistant Professor, University of Piraeus, Department of Economics, M. C. Kolomitsini University of Athens, Department of Economics, M. Xanthakis, Professor, University of Athens, Department of Economics. Ther find opportunities for making abnormal gains to be not as strong during the postderegulation period. When the data is analyzed on the basis of whether or not new listings are financial institution firms, some interesting patterns of price behavior are found. While we observe possibilities of making abnormal gains in new listings of non-financial companies and insurance companies, these possibilities are absent in new listings of banking sector shares indicating that they are efficiently priced relative to those of other sectors. IV. In this paper The trend of Stock-Market Prices[4] the author Eugene F. Fama purpose of this paper will be to discuss first in more detail the theory underlying the random-walk model and then to test the model's empirical validity The main conclusion will be that the data seem to present consistent and for the implies, of course, that chart reading, though perhaps an interesting pastime, is of no real value to the stock market investor. This is an extreme statement and reader is certainly free to take exception' We suggest, however, that since the empirical evidence produced

by this and other studies in support of the random-wa1k is voluminous, the counterarguments of the chart will be completely lacking in force if they are by empirical work. The purpose of this paper has been to test empirically the random-walk model of stock price behavior. The model makes two basic assumptions: (1) successive price changes are independent, and (2) the price changes conform to some probability distribution. We begin this section by summarizing the evidence concerning these assumptions. Then the implications of the results will be discussed from various points of view.

3- Price trend Of New Share Listings In Nigeria by Olatunde Otaniyi, University of South Africa and Daniel Makina, University of South Africa

V. In this title Dividend Policy and Stock Price Behavior in Indian Corporate Sector [5] policy and stock price behavior in Indian corporate sector. A sample of 500 listed companies from BSE are examined for the years 1996-2006.Dividend policy has always been a source of controversy despite years of theoretical and empirical research both in developed countries and emerging economies. 4- The trend of Stock-Market Prices by Eugene F. Fama, the Journal of Business, Vol. 38, No. 1. (Jan., 1965), pp. 34-105, The Journal of Business is currently published by The University of Chicago Press. The present paper features a panel data approach to analyze the relationship between dividend-retention ratio and stock-price behavior while controlling the variables like size and long-term debt-equity ratio of the firm. The sample is taken across six different industries namely electricity, food and beverage, mining, non-metallic, textile and service sector. The results are based on the fixed-effect model, as these perform statistically better than random effects and pooled OLS model. Results of the fixed-effect models indicate that dividend-retention ratio along with size and debt-equity ratio plays a significant role in explaining variations in stock returns. The fixed effect models show the presence of firm level effect in explaining the possible links between dividend policy and stock price behavior of the firm. In another words it exhibits the possibility of clientele effect effect in case of some industries. Therefore the model helps to understand the intricacies of dividend policy and stock-return behavior in Indian corporate sector for the same period.

Although the results are not robust enough as in the case of developed markets but shades some more interesting facets to the existing corporate finance literature on dividend policy in India. VI. In this paper Stock market efficiency and random character of share price trend[6] the author O. P. Guptastudy is aimed at testing the appropriateness of the random walk model in the Indian Stock Market for a recent period 197987. Using data of prices for five shares indices from the Bombay Stock Exchange during this period, both the tests serial correlation and runs analysis, have generally supported the independence assumption of the random walk model.

5- Dividend Policy and Stock Price trend in Indian Corporate Sector: A panel data approach by Upananda Pani

VII. In this paper Stock price trend and operational risk management of banks in India [7] the authors Ketty Vijay Parthasarathy, Dr. R Madhumathi examines Banks in India work in a controlled regime similar to several other countries. The focus of the research is to test the operational risk of sample banks operating in India and identify the extent to which banks are capable of bearing operational risks. 6-Stock market efficiency and random character of share price behavior in India by O. P. Gupta The capital adequacy criteria to account for the operational risk using the Basic Indicator Approach points out that several banks do not meet the regulatory requirements. Further, the stock price movements of banks have been examined for randomness and it has been proved that the bank stock prices do not follow a Geometric Brownian motion. Risk management strategies of banks to reflect the price trend have been examined and banks that have adequate exposure to risk cover have been contrasted with banks having inadequate risk exposure cover. VIII. In this paper Price trend in Emerging Stock Markets: Cases of Poland and Slovakia [8] the authors Hranaiova, Jana analyzes serial correlation in stock returns, and informational role of volume and volatility in Polish and Slovakian stock markets. Results indicate that prices tend to overshoot to new information in the Slovakian market, while new information gets impounded into prices with a one-day lag in the Polish

market. In the context of feedback trading models, the Slovakian stock market seems to be dominated by traders who sell high and buy low, while stop-loss or distress selling type traders prevail in the Polish market.

7- Stock price trend and operational risk management of banks in India by Ketty Vijay Parthasarathy, Dr. R Madhumathi, publisher-Springer Netherlands, volume-7th, Nov 2, 1990.

Traders became more sophisticated over time, as market efficiencies increased. Informational role of volume and volatility appears to be consistent with that found in developed stock markets. IX. In this paper Stock price trend surrounding stock repurchase announcements [9] the authors Takashi Hatakeda and Nobuyuki Isagawa examines stock price behavior surrounding announcements of stock repurchases made by Japanese firms from 1995 to 1998. Our analysis shows that, much as in the case of the U.S. markets, stock prices in Japan go up in response to stock repurchase announcements. We also find that there is no significant difference between the market reaction to the announcement for intention of repurchase execution and the market reaction to the announcement of an article alteration to allow stock repurchases. 8- Price trend in Emerging Stock Markets: Cases of Poland and Slovakia by Hranaiova, Jana On the other hand, there is a significant difference in the pre-announcement period returns motivating these two announcements. While a large decline in stock price will motivate a firm to execute a stock repurchase, a smaller price decline will motivate a firm to merely alter its articles of association to allow future repurchases. X. In this paper Share Price trend around Buy Back and Dividend Announcements in India[10] the authors P. Thirumalvalavan, K. Sunitha examines that over the past few years, many firms have announced significant number of stock repurchases. The overwhelming reason given for stock repurchase announcements has been to reverse a trend of declining stock prices. Share buy backs have become an important area in financial research considering its strong implications for corporate policy. Indian companies have been permitted to buy back shares after the provisions of the Companies Act 1956 were suitably amended in 1999. Several studies have provided conclusive proof of signaling effect of stock repurchase and dividends announcements. This paper

investigates and tests the following: 1) Signaling effect of a share buy - back and dividend announcements 2) The market reaction and share price behavior to announcements of stock repurchases and dividends 3) Abnormal Returns across various repurchase levels. The analysis uses data of 22 firms in the BSE 500 index, which has announced stock repurchase option and dividends during the period 2002-2004. An examination of share price trend around stock repurchases and dividends prove the signaling effect of these announcements.

Stock repurchase programs recorded a high cumulative abnormal return of 3.2 percent within two days of the event whereas dividend announcement recorded a high cumulative abnormal return of 2.1 percent within one day of the event. There is no significant difference in abnormal returns as result of various repurchase levels. These results imply the strong signaling power of stock repurchases announcements and that the market reacts more favorably to repurchases compared to dividend announcements. 9- Stock price trend surrounding stock repurchases announcements by Takashi Hatakeda and Nobuyuki Isagawa 10- Share Price trend around Buy Back and Dividend Announcements in India by P. Thirumalvalavan , Bharathiar University K. Sunitha, Bharathiar University

CHAPTER III ANALYSIS AND INTERPRETATION OF DATA

CHAPTER III MEANING OF TECHNICAL ANALYSIS Price trend of securities in the stock market fluctuates daily on account of continuous buying and selling. Stock prices move in trends and cycles and are never stable. An investor in the stock market is interested in buying securities at a low prices and selling them at a high price so as to get a good return on his investment. He, therefore, tries to analyze the movement of share prices in the stock market. Two approaches are commonly used for this purpose. One of these is fundamental analysis and other is technical analysis. This approach is called technical analysis. Technical analysis is frequently used as supplement to fundamental analysis rather than as a substitute for it. Thus, technical analysis can, and frequently does, confirm findings based on fundamental analysis. The technician does not consider value in the sense in which the fundamentalist uses it. The technician believes the forces of supply and demand are reflected in patterns of price and volume of trading. By examination of these patterns, we can predict whether prices are moving higher or lower, and even by hoe much. In the narrowest sense, the technician believes that price fluctuations reflect logical and emotional forces. And further that price movements, whatever their cause, once in force persist for some period of time and can be detected. The technician must identify the trend and recognize when one trend comes to an end and prices start in the opposite direction. The central problem is to distinguish between reversals within a trend and real changes in the trend itself. This problem of sorting out price changes is critical because prices do not change in a smooth, uninterrupted fashion. The technician views price changes and their significance mainly through price and volumes statistics. The tools or indicators helps to measure price-volume, supply demand relationships for the overall market as well as for individual stocks. Technicians seldom rely upon a single indicator, as no one indicator is infallible; they place reliance upon reinforcement provided by groups of indicators. In this chapter, analysis concentratse upon some of the major technical indicators employed to assess the direction of the general market and the direction of bank stocks.

CORRELATIO
The correlation is one of the most common and most useful statistics. A correlation is a single number that describes the degree of relationship between two variables. Correlation analysis permits the user for the goodness of fit between two variables. The advantage of correlation analysis is that it permits the analyst to have a very specific measure of the explanatory power of the regression equation; and thus the analyst has a means for assessing the reliability of the point estimates. Correlation analysis tells the analyst how well the independent variable explains the dependent variable in the regression equation. Calculating the Correlation The formula for the correlation is:

The symbol r to stand for the correlation. Through the magic of mathematics it turns out that r will always be between -1.0 and +1.0. If the correlation is negative, we have a negative relationship; if it's positive, the relationship is positive. But probably will need to know how the formula relates to real data -- how you can use the formula to compute the correlation.

CORRELATION BETWEEN INDEX PRICE AND CLOSING PRICE OF BANK SECURITIES serial .no 1 2 3 4 5 6 7 8 9 10 list of banks securities STATE BANK INDIA UNION BANK AXIS BANK BANK OF BARODA BANK OF INDIA CANARA BANK HDFC BANK ICICI BANK IDBI BANK KOTAK BANK correlation 0.962872 0.703754 0.932722 0.808269 0.808561 0.885957 0.948336 0.819782 0.906643 0.93113

INTERPRETATION The correlation between index movement and the closing price of bank securities are shown in the chart above. KARL PEARSONS COEFFICIENT OF CORRELATION method is applied to find out the relationship between two variables i.e. index price movement and closing price of bank securities and the coefficient of correlation (r) is found positive. Therefore, it would mean that the correlation had the same relationship between the variable. Thus, there is an effect on the Index price behavior whenever there is change in closing price of bank securities.

PRICE EARNINGS RATIO A price to earnings ratio, otherwise known as a P/E ratio, is a quick calculation used to evaluate how expensive, or cheap, the stock market may be at any given time. Just as an appraiser can come out and give you an estimate of the value of your home, the P/E ratio is a tool you can use to estimate the fair value of the stock market. In simple terms, a P/E ratio is the price (P) divided by earnings (E). A stock with a price of $10 a share, and earnings last year of $1 a share, would have a P/E ratio of 10. In more complex terms, you have to decide whether to look at P/E ratios based on last years earnings, forecasted earnings, or a ten year average of earnings. In addition, P/E ratios for an individual stock must be interpreted much differently than P/E ratios for the market as a whole. DETERMINING A PRICE-EARNINGS RATIO The most commonly used P/E multiplier is defined as the closing price of the stock, divided by the report earnings of the most recent twelve months. Thus, if the closing price of the stock was $50 and earnings for the last four quarters totaled $2, the P/E multiplier would be 25. Generally, the P/E is based upon the current price that is, the closing price of the stock on the day the analysis is being conducted. Thus, the P/E can change daily.

PRICE EARNINGS RATIO AND BOOKVALUE OF 10 BANK SECURITIES STATE BANK OF INDIA Year Month Market Price Per Share 1104.551 1224.773 1614.678 2161.634 2112.412 1536.895 1410.511 1250.875 1088.141 1523.083 1799.845 2259.556 Earnings Per Share 28.37 35.37 40.86 45.29 34.62 25.92 37.48 56.85 43.23 43.45 48.06 52.05 P/E RATIO 38.93377 34.62745 39.51733 47.72873 61.0171 59.29379 37.6337 22.00308 25.17097 35.05369 37.44996 43.41126

2007 Jan-Mar 2007 Apr-Jun 2007 Jul-Sep 2007 Oct-Dec 2008 Jan-Mar 2008 Apr-Jun 2008 Jul-Sep 2008 Oct-Dec 2009 Jan-Mar 2009 Apr-Jun 2009 Jul-Sep 2009 Oct-Dec

UNION BANK Year Month Market Price Per Share 107.1525 115.6637 144.8813 179.1452 185.1274 144.0352 134.2164 148.3805 141.2517 192.8475 228.8922 263.6074 Earnings Per Share 4.53 4.46 5.46 7.23 10.32 4.52 7.16 13.3 9.21 8.75 10 10.57 P/E RATIO 23.65397 25.93357 26.53504 24.77804 17.9387 31.86619 18.74531 11.15643 15.33678 22.03971 22.88922 24.93921

2007 Jan-Mar 2007 Apr-Jun 2007 Jul-Sep 2007 Oct-Dec 2008 Jan-Mar 2008 Apr-Jun 2008 Jul-Sep 2008 Oct-Dec 2009 Jan-Mar 2009 Apr-Jun 2009 Jul-Sep 2009 Oct-Dec

AXIS BANK Year 2007 Month Jan-Mar Market price 502.462 533.49 637.975 903.129 987.99 794.924 686.449 533.131 401.648 657.38 877.43 985.405 Earnings price 7.56 6.2 7.14 9.09 9.89 9.03 11.07 13.78 16.1 15.5 14.38 15.98 P/E RATIO 66.4632 86.0468 89.3522 99.3541 99.8979 88.0314 62.0099 38.6888 24.9471 42.4116 61.0174 61.6649

2007 Apr-Jun 2007 Jul-Sep 2007 Oct-Dec 2008 Jan-Mar 2008 Apr -Jun 2008 Jul-Sep 2008 Oct-Dec 2009 Jan-Mar 2009 Apr -Jun 2009 Jul-Sep 2009 Oct-Dec

BANK OF BARODA Year Month Market Price Per share 226.164 253.161 287.863 363.206 380.374 272.188 266.027 270.897 234.748 371.663 433.28 516.292 Earnings Per Share 6.74 9.08 8.98 13.75 7.59 10.18 10.85 19.45 20.66 18.82 17.41 22.85 P/E RATIO 33.5555 27.8811 32.056 26.415 50.1152 26.7375 24.5186 13.9279 11.3625 19.7483 24.8868 22.5948

2007 Jan- Mar 2007 Apr - Jun 2007 Jul - Sep 2007 Oct - Dec 2008 Jan -Mar

2008 Apr - Jun 2008 Jul - Sep 2008 Oct - Dec 2009 Jan t- Mar

2009 Apr - Jun 2009 Jul - Sep

2009 Oct - Dec

BANK OF INDIA Year Month Market Price Per Share Earnings Per Share 178.173 197.514 246.469 337.789 347.657 298.642 270.005 265.459 233.813 291.19 340.762 390.802 9.18 6.47 8.73 10.5 14.95 10.7 14.53 16.61 15.43 11.13 6.16 7.72 P/E RATIO 19.4088 30.5276 28.2324 32.1704 23.2547 27.9105 18.5826 15.9819 15.1531 26.1626 55.3185 50.622

2007 Jan-Mar 2007 Apr-Jun 2007 Jul-Sep 2007 Oct-Dec 2008 Jan-Mar 2008 Apr-Jun 2008 Jul-Sep 2008 Oct-Dec 2009 Jan-Mar 2009 Apr-Jun 2009 Jul-Sep 2009 Oct-Dec

CANARA BANK

Year 200

Month Jan - Mar

Market Price Per Share Earnings Per Share 226.915 232.3629 262.2383 283.0865 289.3976 218.1082 277.1383 174.6712 176.128 234.5822 277.1383 375.1361 12.32 5.87 9.79 11.19 11.32 2.99 12.91 17.11 17.53 13.54 22.21 25.67

P/E RATIO 18.41843 39.58482 26.78634 25.29817 25.56516 72.94589 21.46695 10.20872 10.04723 17.32513 12.47809 14.61379

2007 Apr - Jun 2007 Jul - Sep 2007 Oct - Dec 2008 Jan - Mar 2008 Apr - Jun 2008 Jul - Sep 2008 Oct - Dec 2009 Jan - Mar 2009 Apr - Jun 2009 Jul - Sep 2009 Oct - Dec

HDFC BANK Year Month Market Price Per Share 1015.361 1049.427 1194.13 1603.194 1503.018 1325.892 1170.261 1006.614 909.9966 1295.984 1462.984 1710.248 Earnings Per Share 10.9 10 10.5 11.9 13.1 10.8 12.3 14.6 14.8 14.1 15.9 18.4 P/E RATIO 93.15237 104.9427 113.7267 134.7222 114.7342 122.7678 95.14317 68.94613 61.48626 91.91375 92.01155 92.94828

2007 Jan-Mar 2007 Apr-Jun 2007 Jul-Sep 2007 Oct-Dec 2008 Jan-Mar 2008 Apr-Jun 2008 Jul-Sep 2008 Oct-Dec 2009 Jan-Mar 2009 Apr-Jun 2009 Jul-Sep 2009 Oct-dec

ICICI BANK Year Month Market Price Per Share 910.8733 903.1968 924.9656 1166.77 1104.585 817.7664 641.4672 404.1407 377.6169 684.6841 759.2008 879.1984 Earnings Per Share 6.23 8.61 9.08 10.99 5.68 6.51 9.09 11.42 6.72 7.87 9.3 9.84 P/E RATIO 146.2076 104.9009 101.8685 106.1665 194.4691 125.617 70.56845 35.38885 56.193 86.99926 81.63449 89.34943

2007 Jan - Mar 2007 Apr - Jun 2007 Jul - Sep 2007 Oct - Dec 2008 Jan - Mar 2008 Apr - Jun 2008 Jul - Sep 2008 Oct - Dec 2009 Jan - Mar 2009 Apr - Jun 2009 Jul - Sep 2009 Oct -Dec

IDBI BANK

Year

Month

Market Price Per Share 86.125 93.7653 123.234 156.325 121.029 90.2361 78.407 65.4958 53.0822 81.2407 103.657 126.273

Earnings Per Share 2.95 2.11 2.15 2.43 3.38 2.2 2.24 3.07 4.33 2.37 3.5 3.96

P/E RATIO 29.1949 44.4385 57.3183 64.3311 35.8074 41.0164 35.0031 21.3341 12.2592 34.2788 29.6163 31.8871

2007 Jan-Mar 2007 Apr-Jun 2007 Jul-Sep 2007 Oct-Dec 2008 Jan-Mar 2008 Apr-Jun 2008 Jul-Sep 2008 Oct-Dec 2009 Jan-Mar 2009 Apr-Jun 2009 Jul-Sep 2009 Oct-Dec

KOTAK BANK

YEAR MONTH

market price per share earnings per share

P/E RATIO

2007 Jan -Mar 2007 Apr - Jun 2007 Jul - Sep 2007 Oct - Dec 2008 Jan - Mar 2008 Apr - Jun 2008 Jul - Sep 2008 Oct - Dec 2009 Jan - Mar 2009 Apr - Jun 2009 Jul - Sep 2009 Oct - Dec

449.2325 550.7411 732.5406 1081.99 926.3669 682.3721 561.4078 380.2653 280.3669 542.8737 686.2039 786.6902

5.22 4.47 7.3 10.48 6.86 4.29 4.62 3.71 6.09 7.41 8.57 9.44

86.05987 123.2083 100.348 103.2433 135.0389 159.0611 121.5168 102.4974 46.03727 73.26231 80.07047 83.33582

P/E RATIO LIST OF BANKS

BOOKVALUE

CORRELATION

S.NO

2007

2008

2009

2007

2008

2009

AXIS BANK

31.23009

24.30795

14.65022

120.8

245.13

284.5

-0.9263

BANK BARODA

9.145456

6.999333

5.973331

237.46

303.18

352.37

-0.9930

BANK INDIA

10.59953

7.423063

5.3635

117.89

160.06

224.39

-0.9708

CANARA BANK

6.747925

5.033368

5.279542

197.83

202.33

244.87

-0.4593

HDFC BANK

33.56807

27.48836

25.6213

201.42

324.38

344.44

-0.9953

ICICI BANK

31.60831

23.28077

20.54747

270.37

417.64

445.17

-0.9957

IDBI BANK

13.25597

8.639395

8.658992

86.09

93.82

102.71

-0.8432

KOTAK BANK

162.2525

21.93077

30.6355

50.95

104.26

112.98

-0.9828

SBIN

12.67723

9.3824

9.701457

594.69

776.48

912.73

-0.8633 0.6676

UNION BANK

8.19499

5.567351

6.073029

93.71

111.33

139.66

INTERPRETATION FOR THE PERIOD 2007 The correlation between P/E ratio and Book value of banks in 2007are shown in theTable . KARL PEARSONS COEFFIDIENT OF CORRELATION method is applied to find out the relationship between two variables i.e. P/E ratio and Book value and the coefficient of correlation (r) is found negative. Therefore, it would mean that correlation has a inverse relationship between variables. Thus, there is an effect on the P/E ratio whenever there is change in book value.

INTERPRETATION FOR THE PERIOD 2008 The correlation between P/E ratio and Book value of banks in 2008 are shown in the .Table KARL PEARSONS COEFFIDIENT OF CORRELATION method is applied to find out the relationship between two variables i.e. P/E ratio and Book value and the coefficient of correlation (r) is found negative. Therefore, it would mean that correlation has a inverse relationship between variables. Thus, there is an effect on the P/E ratio whenever there is change in books value.

INTERPRETATION FOR THE PERIOD 2009

The correlation between P/E ratio and Book value of banks are shown in the chart above. KARL PEARSONS COEFFIDIENT OF CORRELATION method is applied to find out the relationship between two variables i.e. P/E ratio and Book value and the coefficient of correlation (r) is found negative. Therefore, it would mean that correlation has a inverse relationship between variables. Thus, there is an effect on the P/E ratio whenever there is change in book value.

MOVING AVERAGE CONVERGENCE AND DIVERGENCE ( MACD) MACD is an oscillator that measures the convergence and divergence between two exponential moving averages. A short-term exponential moving average and a longterm exponential moving average are calculated with help of the closing price data. A 12 day and 48 day exponential moving average constitute a popular combination. The difference between the short-term EMA and the long-term EMA repr The MACD values for different days are derived by deducting the long-term EMA for each day from the corresponding short-term EMA for the day

These MACD values are plotted on an XY graph with MACD values on the Y axis and time periods on X axis. The MACD line would oscillate across the zero line. If the MACD line crosses the zero line from above, the trend can be considered to have turned bearish, signaling a selling opportunity. On the other hand, if the MACD line moves above zero line from below, the trend can be said to have turned bullish and indicates a buying opportunity. Sometimes, a simple moving average or an exponential moving average of the MACD values is superimposed over the MACD graph. Then buy and sell signals are generated by the cross over the average line and the MACD line. When the lines are below the zero line. If the MACD line crosses the average line from below to above, it indicates a buying opportunity. When the lines are above line, crossing of the, MACD line from above to below the average line signals a selling opportunity.

MACD CHART FOR 14 AND 26 DAYS MOVING AVERAGE A technical analysis is done on the Index price movement by using Simple Moving Average (SMA). A simple moving average (SMA) is the unweighted mean of the previous n data points. In all cases a moving average lags behind the latest data point, simply from the nature of its smoothing. An SMA can lag to an undesirable extent, and can be disproportionately influenced by old data points dropping out of the average. The MACD (MACD means a trend-following momentum indicator that shows the relationship between two moving averages of prices) is calculated by subtracting the 26day simple moving average (SM In this study I have taken index price of 12 bank securities prices for the period of three years from 1st January 2007 to 31st December 2009. Technical analysis is done on the collected data available with the help of Simple Moving Average.

MACD CHART 2007

12000 10000 closing price index 8000 Close 6000 4000 2000 0 1 13 25 37 49 61 73 85 97 109 121 133 145 157 169 181 193 205 217 229 241 index days SMA 14 DAYS SMA 26 DAYS

INTERPRETATION As shown in the chart above it is technically found that The above MACD chart shows that from the day one the closing price comes down over the 14 SMA so it shows a bearish market till the 4th day and from 5th day it shows an buy signal into the market .On the day 37th day it shows a price as went downward trend shows a bearish market and signal of selling the securities. By watching the MACD line it shows on 89th day a reverse trend from bearish to bullish showing a signal to buy the securities which it is shows the expectation of investors for increasing prices.

As similarly by watching the MACD line the prices shows an upward trend and indicating the investors by showing buying signal on 123rd day, 207 Th day, and 225th days respectively. And also MACD chart shows a reverse signal of bullish to bearish market of indicating the investors of selling signal for the 94th day, 147th day and 210th day respectively. So as shown above the 26 line SMA are the fastest moving trend in both bullish and bearish market than 14 line SMA and closing price. The MACD chart above indicates the downward trend in the market for 12 bank NSE securities.

12000 10000

MACD CHART 2008

Closing price index

8000 Close 6000 4000 2000 0 1 14 27 40 53 66 79 92 105 118 131 144 157 170 183 196 209 222 235 SMA 14 DAYS SMA 26 DAYS

INDEX DAYS

INTERPRETATION As shown in the chart above it is technically found that The above MACD chart shows that from the day one the closing price goes up over the 14 SMA so it shows a bullish market till the 49th day and from 50th day it shows an sell signal into the market .On the day 72nd day it shows a price as went upward trend shows a bullish market and signal of buying the securities.

By watching the MACD line it shows on 116th day a reverse trend from bullish to bearish showing a signal to sell the securities that indicates the investors to sell the securities as there was no demand for those securities. As similarly by watching the MACD line the prices shows an upward trend and indicating the investors by showing buying signal on 140th day, 160 Th day, and 222nd days respectively. And also MACD chart shows a reverse signal of bullish to bearish market of indicating the investors of selling signal for the 148th day and 213th day respectively. So as shown above the 26 line SMA are the fastest moving trend in both bullish and bearish market than 14 line SMA and closing price. The MACD chart above indicates the downward trend in the market for 12 bank NSE securities.
12000 10000

MACD CHART 2009

Closing price index

8000 6000 4000 2000 0 1 14 27 40 53 66 79 92 105 118 131 144 157 170 183 196 209 222 235 Close SMA 14 DAYS SMA 26 DAYS

INDEX DAYS

INTERPRETATION As shown in the chart above it is technically found that The above MACD chart shows that from the day one the closing price comes down over the 14 SMA so it shows a bearish market till the 31st day .On the day 88th day it shows a price as went upward trend shows a bullish market and signal of buying the securities. By watching the MACD line it shows on 32th day a reverse trend from bullish to bearish showing a signal to sell the securities that indicates the investors to sell the securities as there was no demand for those securities.

As similarly by watching the MACD line the prices shows an upward trend and indicating the investors by showing buying signal on 100th day, 129th day, 180th day and 206th days respectively.And also MACD chart shows a reverse signal of bullish to bearish market of indicating the investors of selling signal for the 96th day, 113 day, 140th day and 190th day respectively. So as shown above the 26 line SMA are the fastest moving trend in both bullish and bearish market than 14 line SMA and closing price. The MACD chart above indicates the upward trend in the market for 12 bank NSE securities. MACD CHART FOR INDEX AND CLOSING PRICE OF BANK SECURITIES A technical analysis is done on the Index price movement and daily closing price of bank securities in NSE. MACD lines are often regarded as a trend following indicator designed to identify trend changes. The MACD chart as drawn above is sometimes used as an oscillator. Three types of trading signals are generated: MACD line crossing the signal line. MACD line crossing 0. Divergence between price and chart, or between MACD line and price.

Positive divergence between MACD and price arises when price makes a new selloff low, but the MACD doesn't make a new low (i.e. it remains above where it fell to on that previous price low). This is interpreted as bullish, suggesting the downtrend may be nearly over. Negative divergence is the same thing when rising (i.e. price makes a new rally high, but MACD doesn't rise as high as before), this is interpreted as bearish. Divergence may be similarly interpreted on the price versus the chart, where the new price levels are not confirmed by new chart levels. Longer and sharper divergences (distinct peaks or troughs) are regarded as more significant than small shallow patterns in this case. In this study I have taken index price movement and closing price of AXIS BANK for the period of three years from 1st January 2007 to 31st December 2009.

STATE BANK OF INDIA In this study I have taken index price movement and closing price of STATE BANK OF INDIA for the period of three years from 1st January 2007 to 31st December 2009

Close index
Closing index value 15000 10000 5000 0 1 35 69 103 137 171 205 239 273 307 341 375 409 443 477 511 545 579 613 647 681 715 Index days Close index

Close Price
Closing price 3000 2000 1000 0 1 34 67 100 133 166 199 232 265 298 331 364 397 430 463 496 529 562 595 628 661 694 727 Days Close Price

INTERPRETATION As shown in the chart above it is technically found that The MACD chart shows when a crossing occurs. When the MACD line crosses through zero on the chart it is said that the MACD line has crossed the signal line. The MACD chart can also help visualizing when the two lines are coming together. Both may still be rising, but coming together, so a falling histogram suggests a crossover may be approaching. A crossing of the MACD line up through zero is interpreted as bullish, or down through zero as bearish

BANKOFBARODA In this study I have taken index price movement and closing price of BANK BARODA for the period of three years from 1st January 2007 to 31st December 2009.

Close Price
CLOSING PRICE 600 400 200 0 1 37 73 109 145 181 217 253 289 325 361 397 433 469 505 541 577 613 649 685 721 DAYS Close Price

Close index
CLOSING INDEX VALUE 15000 10000 5000 0 1 38 75 112 149 186 223 260 297 334 371 408 445 482 519 556 593 630 667 704 INDEX DAYS Close index

INTERPRETATION As shown in the chart above it is technically found that The MACD chart shows when a crossing occurs. When the MACD line crosses through zero on the chart it is said that the MACD line has crossed the signal line. The MACD chart can also help visualizing when the two lines are coming together. Both may still be rising, but coming together, so a falling histogram suggests a crossover may be approaching. A crossing of the MACD line up through zero is interpreted as bullish, or down through zero as bearish

BANK OF INDIA In this study I have taken index price movement and closing price of BANK INDIA for the period of three years from 1st January 2007 to 31st December 2009.

Close Price
CLOSING PRICE 600 400 200 0 1 35 69 103 137 171 205 239 273 307 341 375 409 443 477 511 545 579 613 647 681 715 DAYS Close Price

Close index
CLOSING INDEX VLAUE 15000 10000 5000 0 1 38 75 112 149 186 223 260 297 334 371 408 445 482 519 556 593 630 667 704 INDEX DAYS Close index

INTERPRETATION As shown in the chart above it is technically found that The MACD chart shows when a crossing occurs. When the MACD line crosses through zero on the chart it is said that the MACD line has crossed the signal line. The MACD chart can also help visualizing when the two lines are coming together. Both may still be rising, but coming together, so a falling histogram suggests a crossover may be approaching. A crossing of the MACD line up through zero is interpreted as bullish, or down through zero as bearish

CANARA BANK In this study I have taken index price movement and closing price of CANARA BANK for the period of three years from 1st January 200 7 to 31st December 2009

Close index
closing index value 15000 10000 5000 0 1 38 75 112 149 186 223 260 297 334 371 408 445 482 519 556 593 630 667 704 index days Close index

Close Price
closing price 600 400 200 0 1 37 73 109 145 181 217 253 289 325 361 397 433 469 505 541 577 613 649 685 721 days Close Price

INTERPRETATION As shown in the chart above it is technically found that The MACD chart shows when a crossing occurs. When the MACD line crosses through zero on the chart it is said that the MACD line has crossed the signal line. The MACD chart can also help visualizing when the two lines are coming together. Both may still be rising, but coming together, so a falling histogram suggests a crossover may be approaching. A crossing of the MACD line up through zero is interpreted as bullish, or down through zero as bearish.

UNION BANK In this study I have taken index price movement and closing price of UNION BANK for the period of three years from 1st January 2007 to 31st December 2009

Close index
Closing index value 12000 10000 8000 6000 4000 2000 0 1 35 69 103 137 171 205 239 273 307 341 375 409 443 477 511 545 579 613 647 681 715 Indexdays

Close index

Close Price
Closing price 300 200 100 0 1 34 67 100 133 166 199 232 265 298 331 364 397 430 463 496 529 562 595 628 661 694 727 Days Close Price

INTERPRETATION As shown in the chart above it is technically found that The MACD chart shows when a crossing occurs. When the MACD line crosses through zero on the chart it is said that the MACD line has crossed the signal line. The MACD chart can also help visualizing when the two lines are coming together. Both may still be rising, but coming together, so a falling histogram suggests a crossover may be approaching. A crossing of the MACD line up through zero is interpreted as bullish, or down

AXIS BANK
In this study I have taken index price movement and closing price of AXIS BANK for the period of three years from 1st January 2007 to 31st December 2009.

Close Price
CLOSING PRICE 1500 1000 500 0 1 38 75 112 149 186 223 260 297 334 371 408 445 482 519 556 593 630 667 704 DAYS Close Price

Close index
CLOSING INDEX VALUE 12000 10000 8000 6000 4000 2000 0 1 38 75 112 149 186 223 260 297 334 371 408 445 482 519 556 593 630 667 704 INDEX DAYS

Close index

INTERPRETATION:As shown in the chart above it is technically found that: The MACD chart shows when a crossing occurs. When the MACD line crosses through zero on the chart it is said that the MACD line has crossed the signal line. The MACD chart can also help visualizing when the two lines are coming together. Both may still be rising, but coming together, so a falling histogram suggests a crossover may be approaching. A crossing of the MACD line up through zero is interpreted as bullish, or down through zero as bearish

HDFC BANK In this study I have taken index price movement and closing price of HDFC BANK for the period of three years from 1st January 2007 to 31st December 2009

Close Price
2000 1500 1000 500 0 1 32 63 94 125 156 187 218 249 280 311 342 373 404 435 466 497 528 559 590 621 652 683 714 days closing price

Close Price

Close index
closing index value 15000 10000 5000 0 1 34 67 100 133 166 199 232 265 298 331 364 397 430 463 496 529 562 595 628 661 694 727 index days Close index

INTERPRETATION As shown in the chart above it is technically found that The MACD chart shows when a crossing occurs. When the MACD line crosses through zero on the chart it is said that the MACD line has crossed the signal line. The MACD chart can also help visualizing when the two lines are coming together. Both may still be rising, but coming together, so a falling histogram suggests a crossover may be approaching. A crossing of the MACD line up through zero is interpreted as bullish, or down through zero as bearish

ICICI BANK In this study I have taken index price movement and closing price of ICICI BANK for the period of three years from 1st January 2007 to 31st December 2009

Close index
closing index value 15000 10000 5000 0 1 32 63 94 125 156 187 218 249 280 311 342 373 404 435 466 497 528 559 590 621 652 683 714 index days Close index

Close Price
2000 1500 1000 500 0 1 35 69 103 137 171 205 239 273 307 341 375 409 443 477 511 545 579 613 647 681 715 Days closing price

Close Price

INTERPRETATION As shown in the chart above it is technically found that The MACD chart shows when a crossing occurs. When the MACD line crosses through zero on the chart it is said that the MACD line has crossed the signal line. The MACD chart can also help visualizing when the two lines are coming together. Both may still be rising, but coming together, so a falling histogram suggests a crossover may be approaching. A crossing of the MACD line up through zero is interpreted as bullish, or down through zero as beari

IDBI BANK In this study I have taken index price movement and closing price of IDBI BANK for the period of three years from 1st January 2007 to 31st December 2009

Close Price
200 150 100 50 0 1 35 69 103 137 171 205 239 273 307 341 375 409 443 477 511 545 579 613 647 681 715 Days closing price

Close Price

Close index
closing index value 15000 10000 5000 0 1 37 73 109 145 181 217 253 289 325 361 397 433 469 505 541 577 613 649 685 721 index days

Close index

INTERPRETATION As shown in the chart above it is technically found that The MACD chart shows when a crossing occurs. When the MACD line crosses through zero on the chart it is said that the MACD line has crossed the signal line. The MACD chart can also help visualizing when the two lines are coming together. Both may still be rising, but coming together, so a falling histogram suggests a crossover may be approaching. A crossing of the MACD line up through zero is interpreted as bullish, or down through zero as bearish.

KOTAK BANK In this study I have taken index price movement and closing price of KOTAK BANK for the period of three years from 1st January 2007 to 31st December 2009

Close index
Closing index value 15000 10000 5000 0 1 32 63 94 125 156 187 218 249 280 311 342 373 404 435 466 497 528 559 590 621 652 683 714 index days Close index

Close Price
1500 closing price 1000 500 0 1 35 69 103 137 171 205 239 273 307 341 375 409 443 477 511 545 579 613 647 681 715 Days Close Price

INTERPRETATION As shown in the chart above it is technically found that The MACD chart shows when a crossing occurs. When the MACD line crosses through zero on the chart it is said that the MACD line has crossed the signal line. The MACD chart can also help visualizing when the two lines are coming together. Both may still be rising, but coming together, so a falling histogram suggests a crossover may be approaching. A crossing of the MACD line up through zero is interpreted as bullish, or down through zero as bearish

CHAPTER IV SUMMARY

Finding The correlation of price earnings ratio and book value of bank securities in NSE by collecting datas from financial statements of those banking securities shows an inverse relation by negative results. The MACD charts of 12 bank securities by analyzing closing price and closing index of those banking securities indicates of bullish market and bearish market and also shows a signal of buy and sell of securities. The MACD charts for closing price of securities for simple moving averages of 14-SMA and 26-SMA line showing a securities position in the stock market. And also indicates an speculation dealings in the bank securities in NSE

Suggestions The correlation of price - earnings ratio and book value as shows in the project are negative so it shows an inverse relationship between these two variables results that banks have negative results of correlation less than 1. The MACD charts show a price behavior of the banking securities in NSE by collecting data of closing price for three years. This chart indicates a stock market trend and the securities value in the market. This shows a bullish market or bearish market and the signal of buying and selling that this year or day etc. As comparing the moving averages of these banking securities it always shows relationship of both upward trend and down ward trend the investors need to watch these securities value and market movement before investing in these market securities and also examining the past price behavior of these securities into the market by the investor. The keen watch on the market condition and past price helps the investors in guiding in which securities to invest and what values it had. This study indicates that the current condition in the banking sectors has an increase trend in the share market. The analyses shows that the private sector banks always show a high speculation and risky trend in investing .So it is better for the investors to invest in public sector bank to ensure safety and earnings than private sector banks.

CONCLUSION A stock market / share market is a public market (a loose network of economic transactions not a physical facility or discrete entity) for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately. The size of the world stock market was estimated at about $36.6 trillion US at the beginning of October 2008. The total world derivatives market has been estimated at about $791 trillion face or nominal value, 11 times the size of the entire world economy. The value of the derivatives market, because it is stated in terms of notional values, cannot be directly compared to a stock or a fixed income security, which traditionally refers to an actual value. Moreover, the vast majority of derivatives 'cancel' each other out (i.e., a derivative 'bet' on an event occurring is offset by a comparable derivative 'bet' on the event not occurring.). Many such relatively illiquid securities are valued as marked to model, rather than an actual market price. CNX Bank Index is an index comprised of the most liquid and large capitalized Indian Banking stocks. It provides investors and market intermediaries with a benchmark that captures the capital market performance of Indian Banks. The index will have 12 stocks from the banking sector which trade on the National Stock Exchange. The total traded value for the last six months of CNX Bank Index stocks is approximately 96.46% of the traded value of the banking sector. CNX Bank Index stocks represent about 87.24% of the total market capitalization of the banking sector as on March 31, 2009. Constituents list of CNX Bank:-Axis Bank Ltd., Bank of Baroda, Bank of India, Canara Bank, HDFC Bank Ltd., ICICI Bank Ltd., IDBI Bank Ltd., Kotak Mahindra Bank Ltd.,

APPENDIX BIBLIOGRAPHY REFERENCE The Behavior of Stock-Market Prices Author: - Eugene F. Fama The Journal of Business, Vol. 38, No. 1. (Jan., 1965), pp. 34-105 Determinants of Equity Prices in the Stock Markets :Author: - Somoye, Russell Olukayode Christopher Dept. of Banking & Finance, Faculty of Management Science Olabisi Onaban University, Ago Iwoye, Nigeria Stock market efficiency and random character of share price behavior in India Author: - O. P. Gupt Price Behavior in Emerging Stock Markets Author: - Hranaiova, Jana Security Analysis and Portfolio Management Book Author: - V.K.Bhalla Investment analysis and portfolio management Book author: - Dr.M.Ranganatham and R.Madhumathi Security Analysis and portfolio management Book author: - Kevin Share Price Behavior around Buy Back and Dividend Announcements in India Author: - P. Thirumalvalavan , Bharathiar University K. Sunitha, Bharathiar University

THE STRUCTURE AND PRICE EFFICIENCY OF AN EMERGING MARKET Author: - Raghbendra Jha, Hari K. Nagarajan, volume-10, year-2000, page-50-59. Stock price behavior surrounding stock repurchases announcements Author: - Takashi Hatakeda and Nobuyuki Isagawa Stock price behavior and operational risk management of banks in India Author: - Ketty Vijay Parthasarathy, Dr. R Madhumathi, publisher-Springer Netherlands, volume-7th, Nov 2, 1990. Modeling stock price behavior by financial ratios Authour :- Teppo Martikainen,journal-decisions in finance,publisher- springer Milan,issue-volume 12,number 1/marc economics and

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