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Summer Internship Project Report on

VOLATILITY IN STOCK MARKET : MOVEMENT OF SENSEX BASED ON MACROECONOMIC VARIABLE By Priyanka Gupta A0101910255

MBA Class of 2012

Under the Supervision of Ms. Lakhwinder Kaur Dhillon Senior Lecturer Department of Finance In Partial Fulfilment of the Requirements for the Degree of Master of Business Administration
at

AMITY BUSINESS SCHOOL AMITY UNIVERSITY UTTAR PRADESH SECTOR 125, NOIDA - 201303, UTTAR PRADESH, INDIA

DECLARATION
Volatility in Share Market : Movement of Sensex Based on Macroeconomic Variables

I declare

(a) That the work presented for assessment in this Summer Internship Report is my own, that it has not previously been presented for another assessment and that my debts (for words, data, arguments and ideas) have been appropriately acknowledged

(b)That the work conforms to the guidelines for presentation and style set out in the relevant documentation.

Date :

Priyanka Gupta

CERTIFICATE
I Ms. Lakhwinder Kaur Dhillon hereby certify that Priyanka Gupta student of Masters of Business Administration at Amity Business School, Amity University Uttar Pradesh has completed the Project Report on Volatility in Share Market : Movement of Sensex based on microeconomic variables, under my guidance.

Ms. Lakhwinder Kaur Dhillon Senior Lecturer Department of Finance

ACKNOWLEDGEMENT
This report is the result of efforts put in by many people who contributed to it by offering valuable suggestions, encouraging advices, constructive criticism and proper guidance. At this level of understanding it is often difficult to understand the wide spectrum of knowledge without proper guidance & advice. Their support and surveillance through out the project stand out as beacon of inspiration to us. I would like to express my gratitude to Kotak Securities Ltd. for giving me opportunity to do my summer internship in their prestigious organization. I am highly indebted to Mr. Prabhpreet Singh ( Branch Manager, Kotak Securities Ltd. ) and Ms. Lakhwinder Kaur Dhillon (Senior Lecturer, Department of Finance Amity Business School) for giving me permission to commence this project and for their guidance and constant supervision as well as for providing necessary information regarding project. I would like to express my gratitude towards my parents whose stimulating suggestion and encouragement helped me in all the time of research and writing this report. My thanks and appreciation also goes to the people working in Kotak Securities Ltd., my colleagues and of course my friends who have willingly helped me out with their abilities. Hereby I acknowledge the support of all.

EXECUTIVE SUMMARY
The unusual rise and fall in of Bombay Stock Exchange (BSE) Sensitive Index (SENSEX) has received a lot of media attention over last couple of decades in India. Even some policy analyst has designated it as an indicator of Indias inevitable growth and development. In this research, attempt has been made to explore the relation especially the causal relation between SENSEX and some economic indicators. Annual data has been used from 2001 to 2010 for all the variables like, SENSEX, gross domestic product (GDP), cash reserve ratio (CRR), foreign exchange rate (FOREX), repo rate, crude oil price, gold price, inflation. Efficiency of the stock markets is one of the most researched topics in financial economics. This project attempts to empirically study the relationship between economic indicators with the stock market. Since all the firms operate in a macro economy, the influence of the economic factor in determining the investment performance cannot be ignored. The interaction among the economic variables and stock market activities has been a busy area of research over a long period of time. In the Indian context there is no dearth of studies regarding determinants of share prices in terms of economic activities. This project in this regard tries to find the possible nexus between market liquidity of Bombay Stock Exchange (BSE) with some very important economic variables namely foreign exchange rate (FOREX), inflation, GDP, repo rate. The above study has inadvertently proved that there is a positive relationship between the economic indicators the BSE. It is a known fact that no one can time the market. Hence a practical suggestion to maximize returns would be depending on the risk profile, 50% of portfolio should constitute equities, at least 10% of portfolio should constitute debt in order to cushion the ups and downs of the market, fixed-income investors should always be aware of the rate of inflation against which they judge their investments.

TABLE OF CONTENTS
COMPANY PROFILE...9 OVERVIEW: BROKERAGE INDUSTRY..12 CHAPTER 1 : INTRODUCTION.......19 Introduction to Stock Market...28 CHAPTER 2 : LITERATURE REVIEW...34 CHAPTER 3 : RESEARCH METHODOLOGY....38 Objective of Research..38 Research Methodology38 Data Collection & Analysis Method...............39 Data Analysis Steps.40 CHAPTER 4 : DATA ANALYSIS & INTERPRETATION..............42 Linear Correlation.... ...42 Multiple Correlation.....48 Linear Regression................50 Multiple Regression.61 CHAPTER 5 : FINDINGS70 CHAPTER 6 : CONCLUSION.................72 APPENDICE............73 REFERENCES.............81

LIST OF TABLES
Table No.
4.1.1.1 4.1.1.2 4.1.1.3 4.1.1.4 4.1.1.5 4.1.1.6 4.1.1.7 4.1.1.8 4.1.2 4.2.1.1 4.2.1.2 4.2.1.3 4.2.1.4 4.2.1.5 4.2.1.6 4.2.1.7 4.2.1.8 4.2.2.1(a) 4.2.2.1(b) 4.2.2.1(c) 4.2.2.1(d) 4.2.2.1(e) 4.2.2.1(f) 4.2.2.2(a)

Table Name
Correlation between Sensex and GDP Correlation between Sensex and Inflation Rate Correlation between Sensex and Forex Rate Correlation between Sensex and Repo Rate Correlation between Sensex and Reverse Repo Rate Correlation between Sensex and CRR Correlation between Sensex and Gold Rate Correlation between Sensex and Crude Oil Prices Multiple Correlation showing all macroeconomic variables with Sensex Regression between Sensex and GDP Regression between Sensex and Inflation Rate Regression between Sensex and Forex Rate Regression between Sensex and Repo Rate Regression between Sensex and Reverse Repo Rate Regression between Sensex and CRR Regression between Sensex and Gold Rate Regression between Sensex and Crude Oil Prices Enter model of Linear Regression Model Summary showing different models Anova for different models Coefficient of different models Excluded variables in model Residuals statistics of Linear Regression Stepwise model of Linear Regression

Page No.
25 26 26 27 28 28 29 30 31 33 34 36 37 38 40 41 42 44 44 45 46 47 47 48

4.2.2.2(b) 4.2.2.2(c) 4.2.2.2(d) 4.2.2.2(e)

Model Summary showing different models Anova for different models Coefficient of different models Excluded variables in model

49 49 50 51

COMPANY PROFILE

THINK INVESTMENT THINK KOTAK

Kotak Mahindra is one of India's leading financial conglomerates, offering complete financial solutions that encompass every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the diverse financial needs of individuals and corporates. The group has a net worth of over Rs. 5,824 crore, employs around 20,000 people in its various businesses and has a distribution network of branches, franchisees, representative offices and satellite offices across 370 cities and towns in India and offices in New York, London, San Francisco, Dubai, Mauritius and Singapore. The Group services around 4.4 million customer accounts. Uday Kotak, the Managing Director of Kotak Mahindra Bank, one of India's top private sector banks, has cautioned Indian companies not to be too exuberant about buying overseas acquisitions, and saying that prosperity for the country's financial sector lay in domestic opportunities.

Kotak Group Products & Services: Bank Life Insurance Mutual Fund Car Finance Securities Institutional Equities Investment Banking Kotak Mahindra International Kotak Private Equity

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KOTAK SECURITIES
Kotak Securities Ltd., a 100 % subsidiary of Kotak Mahindra Bank, is one of the oldest and largest stock broker in the industry. The offerings include stock broking services for stock trading through the branch and Internet, Investments in IPO, Mutual funds and Portfolio management services. Volumes per day Number of customers over 500000 No. of traders per day larger than some of the international brokers over 400000 Client Money Management Rs 2039 Cr of Assets under management Over 3500 employees Reach Presence in 448 cities 1358 outlets

Accolades include: Best Broker in India by FinanceAsia for 2010 & 2009 UTI MF CNBC TV18 Financial Advisor Awards - Best Performing Equity Broker (National) for the year 2009 Best Brokerage Firm in India by Asia0money in 2009, 2008, 2007 & 2006 Best Performing Equity Broker in India CNBC Financial Advisor Awards 2008 Avaya Customer Responsiveness Awards (2007 & 2006) in Financial Services Sector The Leading Equity House in India in Thomson Extel Surveys Awards for the year 2007 Euromoney Award (2007 & 2006) - Best Provider of Portfolio Management: Equities Euromoney Award (2005)-Best Equities House In India

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Finance Asia Award (2005)-Best Broker In India Finance Asia Award (2004)- India's best Equity House

The company has a full-fledged research division involved in Macro Economic studies, Sectoral research and Company Specific Equity Research combined with a strong and well networked sales force which helps deliver current and up to date market information and news. Kotak Securities Ltd is also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL), providing dual benefit services wherein the investors can use the brokerage services of the company for executing the transactions and the depository services for settling them. Kotak Securities has 877 outlets servicing over 4,30,000 customers and a coverage of 321 cities. Kotaksecurities.com, the online division of Kotak Securities Limited offers Internet Broking services and also online IPO and Mutual Fund Investments. Kotak Securities Limited has over Rs.4500 crores of Assets Under Management (AUM) as of 31th March,2011. The portfolio Management Services provide top class service, catering to the high end of the market. Portfolio Management from Kotak Securities comes as an answer to those who would like to grow exponentially on the crest of the stock market, with the backing of an expert.

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Overview : Brokerage Industry

The Indian broking industry is one of the oldest trading industries that had been around even before the establishment of BSE in 1875. Despite passing through the no. of changes in the post liberalization period, the industry has found its way towards sustainable growth. The evolution of brokerage market is explained in three phases: pre 1990, 1990-2000, post 2000. The Early Years The equity brokerage industry in India is one of the oldest in the Asian region. India had an active stock market of about 150 years that played significant role in developing risks market as also promoting enterprise and supporting the growth of industry. The roots of stock market in India began in 1860s during the American civil war that led to a sudden surge in the demand for cotton from India resulting in setting up of no. of joint stock companies that issued securities to raise finance. This trend was akin to the rapid growth of securities market in Europe and the North America in the background of expansion of railroads and exploration of natural resources and land development. Bombay, at that time was a major financial centre having housed 31 banks, 20 insurance companies and 62 joint stock companies. The Securities and Exchange Board of India (SEBI), which was set up in 1988 as anadministrative arrangement, was given statutory powers with the enactment of the SEBI Act,1992. The broad objectives of the SEBI include to protect the interests of the investors in securities to promote the development of securities markets and to regulate the securities markets

Rapid Growth The last decade has been exceptionally good for the stock markets in India. In the back of wideranging reforms in regulation and market practice as also the growing participation of foreigninstitutional investment, stock markets in India have showed phenomenal growth in the early1990s. The stock market capitalization in mid-2007 is nearly the same size as that of the grossdomestic product as compared to about 25 percent of the latter in the early 2000s. Investor basecontinued to grow from domestic and international markets. The value of share trading witnesseda sharp jump too. Foreign institutional investment in Indian stock markets showed continuousrise reaching about USD10 bn in each of these years between FY04 to FY06. Stock markets became intensely technology and process driven, giving little scope for manual intervention thathas been the source of market abuse in the past.

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Indian Brokerage Indstry

Indian in Global Market The stature and significance of India is growing in the world capital market. India is not only attracting greatest interest from world markets, but is also assuming incrasing importance in global finance. India is major recipient of FIIs amongst the emerging markets. Since the opening up of domestic stock markets to foreign investors, cumulative net FII investments reached Rs 517bn by 2008 end. India is major destination of private equity flows into the emerging market India was to host to the annual meetings/conference of the World Federation of Exchanges (2005) and International Organization of Securities Commission (2007) India emerged as a leading player in commodities futures market. India is amongst the top five in the no. of transactions. India is one of the few markets with extensive dematerialization of shares. India stock market has the largest no. of listings, with trading taking place in about, 2500-3000 stocks. Indias most popular stock index (Sensex) is constructed on the basis of full float methodology, one of the firsts in the Asian region and a global standard Indian market indices such as Sensex and CNX Nifty are listed in foreign exchanges for trading as ETFs. Indias T+2 securities settlement cycle is at par with global standards. The year that was (2008) Secondary market trading volumes down 33% YoY FII outflows of USD 12 bn Nifty down 36% Advisory transactions stable though some ground lost PE deals had fallen to almost half ECM activity down 90% DCM relatively stable, though activity level were lower in second half of the F08 due to liquidity crunch and counterparty fears Recent Trends (2009) Global risk aversion is unwinding and confidence levels returning, being reflected in performance of the indices. Liquidity and credit flows improving Political stability and India re-rating FII and Domestic Flows resuming, USD 7bn FII inflow in April & May Secondary volumes showing early signs of uptrend, average daily volumes of Rs 800bn vs. 620bn in previous year.

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Market Structure
Indian securities market is fairly large as compared to several other emerging markets. Institutional Structure of the Indian Stock market :

Market Intermediaries Stock Exchanges (cash market) Stock exchanges (Derivative market) Brokers (cash segment) Corporate brokers (cash segment) Sub-brokers (cash segment) Brokers Foreign Institutional Investors Custodian Depositories Depository Participants Merchant Bankers Bankers to an Issue Underwriters Debenture Trustees Credit rating agencies

2008 19 2 9487 4190 44074 1442 1319 15 2 654 155 50 35 28 5

Major Players
Among all the Indian brokerage companies, the top 10 Brokerage Firms in India can be listed as below:

Name

Terminals

Sub-brokers

No. of Employees 4008 3910 5873 1900 2193

No. of Branches 350 581 522 294 63

Kotak Seurities Limited Karvy Stock Broking Limited Indiabulls IL & FS Investments Limited Motilal Oswal Securities

4320 1700 2876 1644 7923

910 19000 NA NA 890

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Reliance Money India Infoline Angel Broking Limited Anand Rathi Securities Limited Geojit

2428 173 5715 1527 627

1494 173 NA 320 247

2037 NA 284 4566 343

142 605 NA 220 314

Porters Five Forces

The Bargaining power of Customers Lack of expertise curtails bargaining powers Retail investors often lack the knowledge and expertise in the financial sector that calls them to approach the broking house. Low product differentiation proves beneficial. The retail broking services provided by various companies is homogeneous with very low product differentiation. This allows customer to enjoy great bargaining powers. The Bargaining Power of Suppliers Increased dependence on IPOs There is a growing dependence of corporate on broking houses with the rising no. of IPOs coming to the market. The Intensity of Competitive Rivalry Move towards consolidation Lot of brokerage companies are moving towards consolidation with the smaller ones either becoming franchisees for the large brokers or closing operations. Increased focus of banks on retail broking Various foreign banks like ABN amro and others are planning to enter the Indian retail brokerage industry. Online Trading competes with traditional brokerage There is an increasing demand for online trading due to consumers growing preference for internet as compared to approaching the brokers. Threat of New Entrants Entry of Foreign Players

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New forms of trading including T+2 settlement system, dematerialization etc are strengthening the retail brokerage market and attracting foreign companies to enter the Indian industry. Threat of substitute products Alternative Investment Options Various alternative forms of investment including fixed deposits with banks and post offices etc act as substitutes to retail broking products and services. Now even various banks provide similar type of services. They also give the same service of portfolio management and wealth management.

SWOT Analysis Strenghts

Multiples engines of growthanintegrated financial services platform Well established and continuouslyexpanding geographical footprints Unique, stable and scalable businessmodel Adoption of technology screenbased trading, electronic matching, and paperless securities Centralized operations, effective risk management, and control on largeinterconnected operations spanningmultiple locations, which is enabled bytelecom connectivity and low costs Accessibility of capital increases andmargin finance increases

Weaknesses
Lack of visible goodwill among minor players Lack of trust on companies bycustomers Psyche of people in India is converging Companies are still running on sellingconcept Weak infrastructural facilities Compliance with strict rules and normsset by govt.

Opportunities
Structure of the industry, market size,and growth rates-huge potential inIndian market Government is continuouslyliberalizing the market Proactive and progressive nature of Indian brokerage industry(India ranksamongst top five globally in thissegment) Economy is still growing at healthy

Threats
High degree competition Fluctuations in government policies Political framework Developing Indian economy Companies must develop andimplement physical, administrative andtechnical safeguards to achieve thefollowinggoals: Ensure the security andconfidentiality

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rateleading to investment / capitalrequirement Huge market opportunity for wealthmanagement service providers asIndian wealth management business istransforming from mere wealthsafeguarding to growing wealth. Leveraging technology to enable best practices and processes Corporates looking at consolidation /acquisitions / restructuring opens outopportunities for the corporate advisory business.

of customer records and information Secure against any anticipatedthreats or hazards to the securityor integrity of such information Secure against unauthorizedaccess to or use of suchinformation that could result insubstantial harm or inconvenience to any customer Corporate espionage

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CHAPTER 1 INTRODUCTION

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The stock market in India existed for a well over a century now; its importance in the mobilization, allocation and efficient use of scarce investment recourses has not been recognized until the last decade. Volatility of security price has important implications for firms investment and financial decisions, valuations and investors sentiments. This fluctuation is caused by many factors of them are economic indicators. Hence analysis of economic indicators and its impact on stock market is the topic of this dissertation. An efcient capital market is one in which security prices adjust rapidly to the arrival of new information and, therefore, the current prices of securities reect all information about the security. What this means, in simple terms, is that no investor should be able to employ readily available information in order to predict stock price movements quickly enough so as to make a prot through trading shares. Championed by Fama (1970), the efficient market hypothesis (EMH), in particular semi-strong form efficiency, which states that stock prices must contain all relevant information including publicly available information, has important implications for policy-makers and the stock-broking industry alike. Policy makers, for example, should feel free to conduct national macroeconomic policies without the fear of inuencing capital formation and the stock trade process. Moreover, economic theory suggests that stock prices should reect expectations about future corporate performance, and corporate prots generally reect the level of economic activities. If stock prices accurately reect the underlying fundamentals, then the stock prices should be employed as leading indicators of future economic activities, and not the other way around. Therefore, the causal relations and dynamic interactions among macroeconomic variables and stock prices are important in the formulation of the nations macroeconomic policy. As for the effect of macroeconomic variables such as money supply and interest rate on stock prices, the efficient market hypothesis suggests that competition among the protmaximizing investors in an efficient market will ensure that all the relevant information currently known about changes in macroeconomic variables are fully reected in current stock prices, so that investors will not be able to earn abnormal prot through prediction of the future stock market movements (Chong and Koh 2003). Therefore, since investment advisors would not be able to help investors earn above-average returns consistently, except through access to and employing insider information, a practice generally prohibited and punishable by law, there should be no stock broking industry, if one were to believe the conclusions of the EMH.

What is Volatility ?
In finance, volatility is a measure for variation of price of a financial instrument over time. Historic volatility is derived from time series of past market prices. An implied volatility is derived from the market price of a market traded derivative (in particular an option). It is common for discussions to talk about the volatility of a security's price, even while it is the returns' volatility that is being measured. It is used to quantify the risk of the financial

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instrument over the specified time period. Volatility is normally expressed in annualized terms, and it may either be an absolute number ($5) or a fraction of the mean (5%). The issues of volatility and risk have become increasingly important in recenttimes to financial practitioners, market participants, regulators and researchers.Amongst the main concerns, which are currently expressed include: - has theworlds financial system become more volatile in recent times? Has financialderegulation and innovation lead to an increase in financial volatility or has it successfully permitted its redistribution away from risk averse operators to more risk neutral market participants? Is the current wave of financial innovation leading to a complete set of financial markets, which will efficiently distribute risk? Has global financial integration led to faster transmission of volatility and risk across national frontiers? Can financial managers most efficiently manage risk under current circumstances? What role the regulators ought to play in the process? This paper would be useful in debating some/all of these issues.

Indian Stock Market Volatility

Stock prices are changed everyday by the market. Buyers and sellers cause prices to change as they decide how valuable each stock is. Basically, share prices change because of supply and demand. If more people want to buy a stock than sell it - the price moves up. Conversely, if more people want to sell a stock, there would be more supply (sellers) than demand (buyers) - the price would start to fall. Volatility in the stock return is an integral part of stock market with the alternating bull and bear phases. In the bullish market, the share prices soar high and in the bearish market share prices fall down and these ups and downs determine the return and volatility of the stock market. Volatility is a symptom of a highly liquid stock market. Pricing of securities depends on volatility of each asset. An increase in stock market volatility brings a large stock price change of advances or declines. Investors interpret a raise in stock market volatility as an increase in the risk of equity investment and consequently they shift their funds to less risky assets. It has an impact on business investment spending and economic growth through a number of channels. Changes in local or global economic and political environment influence the share price movements and show the state of stock market to the general public. The issues of return and volatility have become increasingly important in recent times to the Indian investors, regulators, brokers, policy makers, dealers and researchers with the increase in the FIIs investment. Hence in this paper an attempt has been made to analyses the return volatility

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SENSEX
The Bombay Stock Exchange SENSEX (portmanteau of sensitive and index) also referred to as BSE 30 is a free-float market capitalization-weighted index of 30 well-established and financially sound companies listed on Bombay Stock Exchange. The 30 component companies which are some of the largest and most actively traded stocks, are representative of various industrial sectors of the Indian economy. Published since January 1, 1986, the SENSEX is regarded as the pulse of the domestic stock markets in India. The base value of the SENSEX is taken as 100 on April 1, 1979, and its base year as 1978-79. On 25 July, 2001 BSE launched DOLLEX-30, a dollar-linked version of SENSEX. As of 21 April 2011, the market capitalisation of SENSEX was about 29,733 billion (US$663 billion) (42.34% of market capitalization of BSE), while its free-float market capitalization was 15,690 billion (US$350 billion). The Bombay Stock Exchange (BSE) regularly reviews and modifies its composition to be sure it reflects current market conditions. The index is calculated based on a free float capitalization methoda variation of the market capitalization method. Instead of using a company's outstanding shares it uses its float, or shares that are readily available for trading. The free-float method, therefore, does not include restricted stocks, such as those held by promoters, government and strategic investors.[1] Initially, the index was calculated based on the full market capitalization method. However this was shifted to the free float method with effect from September 1, 2003. Globally, the free float market capitalization is regarded as the industry best practice. As per free float capitalization methodology, the level of index at any point of time reflects the free float market value of 30 component stocks relative to a base period. The market capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company. This market capitalization is multiplied by a free float factor to determine the free float market capitalization. Free float factor is also referred as adjustment factor. Free float factor represent the percentage of shares that are readily available for trading. The calculation of SENSEX involves dividing the free float market capitalization of 30 companies in the index by a number called index divisor. The divisor is the only link to original base period value of the SENSEX. It keeps the index comparable over time and is the adjustment point for all index adjustments arising out of corporate actions, replacement of scrips, etc. The index has increased by over ten times from June 1990 to the present. Using information from April 1979 onwards, the long-run rate of return on the BSE SENSEX works out to be 18.6% per annum, which translates to roughly 9% per annum after compensating for inflation.

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Macroeconomic Indicators
An economic indicator is a statistic about the economy. Economic indicators allow analysis of economic performance and predictions of future perform an economic indicator is the study of business cycle. Economic indicators include various indices, earnings reports, and economic summaries. Examples: unemployment rate, quits rate, housing starts, Consumer Price Index (a measure for inflation), Consumer Leverage Ratio, industrial production, bankruptcies, Gross Domestic Product, broadband internet penetration, retail sales, stock market prices, money supply changes. An economic indicator is in simple terms, the official statistical data of a certain economic factor that are published periodically by the government agencies, which an investor can use to gauge the economic situation. It allows investors to analyze the past and current situation and to project the future prospects of the economy.

Gross Domestic Product of India

The growth in the economy is measured in terms of an increase in the size of a nations economy. A broad measure of an economys size is its output. The most widely used measure of economic output is Gross Domestic Product, abbreviated GDP. GDP is generally defined as a market value of goods and services produced by a country. It is considered as the broadest measure of economic output and growth. The Bureau of economic analysis issues its own analysis document with each GDP release, which is a great investor tool for analyzing figures and trends, and reading highlights of the very lengthy full release. When the GDP is positive, the overall stock market will react positively as there will be a boost in investor confidence, encouraging them to invest more in the stock market. This will in turn boost the performances of companies. When the GDP contracts, consumers tread cautiously and reduce their spending. This in turn will affect the performance of companies negatively, thus exerting more downward pressure on the stock market. GDP affects the stock market through its effect on inflation, as well as through its uses a key indicator of economic activity and future economic prospects by investors. Any significant change in the GDP, either up or down, can have a major effect on investing sentiments. If investors believe that the economy is improving, they are more likely to pay for a given stock. If GDP is declining, they would be willing to pay less for a given stock, leading to decline in the stock market.

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Inflation
Inflation is an increase in the price of a basket of goods and services that is representative of the economy as a whole. Inflation is important for all investments, simply because it determines thereal rate of return that you get from your investment. For instance, if the inflation rate is 5 per cent and the nominal return is 8 per cent, this means that your real rate of return is 3 per cent as the 5 per cent has been eaten by inflation. Inflation's impact on the stock market is even more complicated. A company's profit will be affected by higher inflation. Its input cost will increase and the impact of the increase will depend on how much of the incremental cost the company is able to pass on to its consumers. The amount that the company will have to absorb will reduce its profits, assuming all else being equal. The stock market will suffer further negative impact if it is accompanied by increased interest rates as the bond market is seen as a cheaper investment vehicle compared to stocks. When this happens, investors will sell off their stocks to invest in bonds instead. The most commonly used indicator for the measurement of inflation is consumer price index (CPI). It consists of a basket of goods and services commonly purchased by consumers, such as food, housing, clothes, transportation, medical care and entertainment. Inflation is a significant indicator for securities markets because it determines how much of the real value of an investment is being lost, and the rate of return you need to compensate for that erosion. For example, if inflation is at 3% this year, and your investment also increases by 3%, in real terms you have just managed to stay even. And to take on market risk, most individuals require a risk premium above and beyond the inflation rate. So investors who buy stocks do so expecting they will get a return equal to (or better than) that risk premium adjusted by the inflation rate. So the higher the inflation rate, the higher nominal return is needed for a stock price to remain the same.

Repo Rate
.That changes in interest rates affect returns from fixed-income investment avenues is obvious Equally, changes in interest rates have profound impact on the direction of the stock market. In fact, interest rates are a key driver of the stock market. The Indian debt market comprises broadly of government securities (G-Secs) and bonds PSU Bonds, bonds issued by financial institutions such as ICICI and IDBI, and corporate bonds and debentures, with G-Secs being the most dominant. Unlike in developed countries such as the US where the debt markets are significantly larger than the stock market, in India the situation is the reverse. The reason: interest rates in India were till recently strictly

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regulated and the number of players in the debt market relatively few. The de-regulation of interest rates, however, is now changing all that. A freer interest rate regime, with frequent changes in interest rates, obviously leads to fluctuation in the returns from fixed income instruments. Indian investors have of late discovered this to their dismay as the lowering of interest rates offered on ever-green instruments such as PPF, NSCs, bank deposits has eaten into their income returns. The impact of interest rates on your personal finances extends well beyond your debts. Interest rates affect your equity portfolio, too. There is plenty of evidence. Indeed, in history to prove that interest rates can have a profound impact on the stock market. As a result, the stock market watches the bond market like a hawk. Stock market professionals respond predictably to the RBIs periodic raising or lowering, of interest rates. By gaining a better understanding of the debt market, you can recognize the potential risks and opportunities that movements of the debt market present for equity investment. A clear grasp of the goings-on in the debt market will help you understand how it affects the stock market and refine your investment decision-making process. In sum, a lowering of interest rates generally lifts the stock market. Conversely stock market tend to slip as interest rates rise. This is not to say that this happens in perfect co-ordination . It takes time for changes in interest rates to work their way through the markets in the manner described above. For an alert investor, though, changes in interest rates offer pointers to switch from debt investments to the equity market when interest rates fall and vice versa.

Reverse Repo Rate

If RBI increases this reverse repo rate, it means RBI wants to contraction of credit. When RBI gets loan from banks at high rate of interest, more and more banks will supply to central bank because it is safe and earning is more. Effect of this will on financial market. Supply of money in financial market will decrease. In economics, it is simple rule, if supply is limited and demand increases, price of product will increase. Bank has lots of demand but due to limitation of supply, bank increases interest rate. That is the reason. But its positive effect will on credit. Due to decrease in the supply of credit in the market, inflation rate will decrease. Loan is also source of money. People get loan and buy their products. With increasing reverse repo rate, loan is transfer to central bank. Now, people will have to pay more interest on limited loan. They will not get loan at high interest. Due to this, they will not buy the goods when prices increases. When businessmen's products will not sell, they have to decrease prices. When prices will decrease inflation will under control. .Foreign Exchange Rate (FOREX RATE) Foreign exchange is the currency of other countries and Foreign Reserves mean deposits of international currencies held by a central bank. Foreign reserves grant governments to keep

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their currencies stable, reserves are used as a tool of exchange rate and monetary policy, it assist for the payment of external debt and liabilities, it act as a defense against unexpected emergencies and economic shocks. Estimates of the correlation between stock market and exchange rate has been widely analyzed and studied in reality and theory. The classical economic theory put forward that the performance of stock market and exchange rate presents correlativity. For instance, the floworiented decision model of exchange rate (Dornbusch and Fisher, 1980) presents that the currency movement affects the international competitiveness of enterprises, trade balance as well as the real product of a country and thus have an impact on the companys cash flow and stock price as followed. On the other hand, as one part of the wealth, equity capital of the shareholders maybe affects the volatility of exchange rate through the need of capital. The empirical study found that the relationship between the stock market and exchange rate exist different results. Aggarwal (1981) found that it had positive correlation between the pricing of dollar and the return of stock market through the monthly data researching, while Roll (1992) also found that there is positive correlation between the two markets through the daily data analyzing. In contrast, Chou (1997) discovered that, through the monthly data analyzing, there is no correlation between excess return of stock market and the real exchange rate. Recent study on the relationship between stock price and exchange rate mostly resort to the use of the concept of Granger causality and related analytical tools. For instance, BahmaniOkooce (1992) released the conclusion that there is two-way causal role between the U.S. stock market and the exchange rate. Granger (2000) argued that it is more appropriate to research short-term changes of the capital market using daily data and his empirical analysts indicated that most of the Asia countries (Hong Kong, Malaysia, Singapore, Thailand and Taiwan, etc.) exchange rate and stock price have a strong interaction. Yuan Dongmei (2006) analyzed the relationship of the appreciation of Japanese yen and Nikkei Stock Price Average and the conclusion showed that the appreciation of Japanese yen has caused the rising of Nikkei Stock Price Average in a short run, while the disappearance of the appreciation would cause the depression of stock market and the economy in a long run

Cash Reserve Ratio

The CRR is the rate of the money the banks used to keep with the RBI for security without any interest. How it will impact the banks profitability! for example if bank A collects 10000/- deposit from you then out of the 10000/- he has to keep Rs 500 at the rate of 5% with the RBI. The net amount left with the bank will be 9500/- . if the CRR is getting hiked then RBI will suck the money from the system in order to meet the trade deficit. Same time the bank will have money supply deficit to meet all the loan demand. Once the money supply will be reduced then the loan rates or lending rates will increase. 80% of the banks lending

26

will be short term trade loan which used to settle on fourth night basis. The increase in interest rate will directly impact the housing, experts, banks, automobile sell figure etc in the short term. Since market is more sensitive towards the short term reactions it can lead to the fall in the above sectors. The real jerk will be felt in the monthly sell figure and turnover of the above mentioned sectors. Continuous increase in the CRR may impact the quarterly profitability of the above sectors. Second point is if it is inline with the increase in the interest rate in the cash deposits then it will directly impact the stock market since the big money will flow out from the high risk sector to the low risk sector resulting low participation in the market. The trader should follow following strategy to reduce risk mechanism : 1. The key reaction to this kind of move by the central bank will increase the volatility and huge swing in the market. 2.One should not be panic in this market. 3.Though this region is enough for a good correction but we traders need to be very much alert to make money from speculation. 4.Swing trade is a best idea for the day traders in this junction. 5.For F&O trades please do avoid futures and adopt low risk option. 6.One can buy immediate out of money call option in script and immediate out of money put in index for best result. 7.Always my favorite is to form a 4/2 call spread and 2/1 put spread in this junction one need to follow the technical very carefully before initiating this.

Gold Prices (GOLD)

Investors have historically used simple risk adherent strategies in their portfolios such as diversifying across countries and including gold or oil investments because these two investments typically had an inverse relationship with stock market movements. Technology has changed the environment where there are very few obstacles to hinder investors to buy or sell assets anywhere in the world today. There are also many other options for investors to use for risk aversion so that gold or oil might be considered as merely another commodity. The results of various studies shows that there is a strong, positive association between the stock market indexes, while gold's expected inverse relationship with stock prices has changed over time. Investors typically include investments in their portfolios that have historically exhibited inverse relationships with stock market movements as risk insurance. Gold investments, both direct and indirect, have fit this requirement for many years. Gold historically combated losses that occurred during period of inflation, social unrest, and war when stock prices fell. During crises such as these, gold prices soared as stock prices tumbled. Indirect gold investments such as gold mining stocks often fared even better than direct gold investments during these times as rising gold prices could turn many unprofitable or marginally profitable

27

gold mines into moneymakers. Financial advisors were often quick to advise investors to maintain a position in gold during trying times. Conversely, during boom times, gold investments often decreased in value as stock prices increased as evidenced by the early 1990's when inflation was minimal or nonexistent. Some investors dropped gold investments taking the belief that gold had no portfolio risk aversion value and treated it as any other commodity whose price changes were strictly determined by supply and demand.

Crude Oil Price (Oil Rate)

The crude oil market is the largest commodity market in the world. Total world consumption equals around 70-80 million barrels a day of which the United States consumes approximately 25 percent. That's right: we burn one out of four barrels produced, even though we have less than 5% of the world's population. Several times total consumption is traded daily on crude oil, spot, futures and over-the-counter markets at exchanges in New York (NYMEX) and London (IPE). oil prices exerted a terrible influence on the stock market in the 1970s and 1980s and are now doing so again. Crude prices could spike even higher, but may well pull back in the short term. Some have speculated that crude oil prices could hit $100/barrel in one to two years if events fall into place just right. The impact of changes in the oil price on stock returns tends to be large. For instance, a decrease of the oil price of 10% in the U.S. will double the expected return on the stock market in the following month. This oil effect is also significantly present in the world market index. In other words, the stock market tends to move in the opposite direction to oil prices. Oil up, stocks down. Oil down, stocks up. This is a one-way street, however; stock market returns do not drive crude oil prices. So you can expect oil to be the primary force driving the stock markets until further notice. As a whole, a rising trend for oil prices is bullish for the stock marketas long as it does not involve a parabolic mania driven spike that is likely to kill future economic demand and is thus discounted in the present by the stock market trending lower, with the oil prices soon catching up to the stock price decline as occurred during the second half of 2008. The current situation with oil prices hovering just above $100, is not bearish for the stock market as long as the oil price does nothing more than just trend higher rather than enter into a mania driven spike for instance to say $150 by mid summer, therefore a gradual uptrend is unlikelt to impact significantly on stock market Inversely a weak oil price is likely to be bearish for the stock market. However the current outlook is at worst suggestive of oil prices consolidating before trending higher and therefore continue to support a bullish outlook for stock prices

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INTRODUCTION TO STOCK MARKET

In Latin America, there are such exchanges as the BM&F Bovespa and the BMV. A stock market or equity market is a public (a loose network of economic transactions, not a physical facility or discrete) entity for the trading of company stock (shares) 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 at the start 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. 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 asmarked to model, rather than an actual market price. The stocks are listed and traded on stock exchanges which are entities of a corporation or mutual organization specialized in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together. The largest stock market in the United States, by market capitalization, is the New York Stock Exchange(NYSE). In Canada, the largest stock market is the Toronto Stock Exchange. Major European examples of stock exchanges include the Amsterdam Stock Exchange,London Stock Exchange, Paris Bourse, and the Deutsche Brse (Frankfurt Stock Exchange). In Africa, examples include Nigerian Stock Exchange, JSE Limited, etc. Asian examples include the Singapore Exchange, the Tokyo Stock Exchange, the Hong Kong Stock Exchange, the Shanghai Stock Exchange, and the Bombay Stock Exchange

History of Stock Market

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. A common misbelief is that in late 13th century Bruges commodity traders gathered inside the house of a man called Van der Beurze, and in 1309 they became the "Brugse Beurse", institutionalizing what had been, until then, an informal meeting, but actually, the family Van der Beurze had a building in Antwerp where those gatherings occurred;[6] the Van der Beurze had Antwerp, as most of the merchants of that period, as their primary place for trading. The idea quickly spread

29

around Flanders and neighboring in Ghent and Amsterdam.

counties

and

"Beurzen"

soon

opened

In the middle of the 13th century, Venetian bankers began to trade in government securities. In 1351 the Venetian government outlawed spreading rumors 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.[7]

Importance of Stock Market

Function and purpose The stock market is one of the most important sources for companies to raise money. This allows businesses to be publicly traded, or raise additional financial capital for expansion by selling shares of ownership of the company in a public market. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such asreal estate History has shown that the price of shares and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood. An economy where the stock market is on the rise is considered to be an up-and-coming economy. In fact, the stock market is often considered the primary indicator of a country's economic strength and development Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. Therefore, central banks tend to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system functions. Financial stability is the raison d'tre of central banksExchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transactionThe smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. In this way the financial system contributes to increased prosperity.

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Relation of the stock market to the modern financial system The financial system in most western countries has undergone a remarkable transformation. One feature of this development is disintermediation. A portion of the funds involved in saving and financing, flows directly to the financial markets instead of being routed via the traditional bank lending and deposit operations. The general public's heightened interest in investing in the stock market, either directly or through mutual funds, has been an important component of this process. Statistics show that in recent decades shares have made up an increasingly large proportion of households' financial assets in many countries. In the 1970s, in Sweden, deposit accounts and other very liquid assets with little risk made up almost 60 percent of households' financial wealth, compared to less than 20 percent in the 2000s. The major part of this adjustment in financial portfolios has gone directly to shares but a good deal now takes the form of various kinds of institutional investment for groups of individuals, e.g., pension funds, mutual funds, hedge funds, insurance investment of premiums, etc. The trend towards forms of saving with a higher risk has been accentuated by new rules for most funds and insurance, permitting a higher proportion of shares to bonds. Similar tendencies are to be found in other industrialized countries. In all developed economic systems, such as the European Union, the United States, Japan and other developed nations, the trend has been the same: saving has moved away from traditional (government insured) bank deposits to more risky securities of one sort or another.

Indian Stock Market

BSE Bombay Stock Exchange is the oldest stock exchange in Asia What is now popularly known as the BSE was established as "The Native Share & Stock Brokers' Association" in 1875. Over the past 135 years, BSE has facilitated the growth of the Indian corporate sector by providing it with an efficient capital raising platform. Today, BSE is the world's number 1 exchange in the world in terms of the number of listed companies (over 4900). It is the world's 5th most active in terms of number of transactions handled through its electronic trading system. And it is in the top ten of global exchanges in terms of the market capitalization of its listed companies (as of December 31, 2009). The companies listed on BSE command a total market capitalization of USD Trillion 1.28 as of Feb, 2010. BSE is the first exchange in India and the second in the world to obtain an ISO 9001:2000 certification. It is also the first Exchange in the country and second in the world to receive Information Security Management System Standard BS 7799-2-2002 certification for its BSE

31

On-Line trading System (BOLT). Presently, we are ISO 27001:2005 certified, which is a ISO version of BS 7799 for Information Security. The BSE Index, SENSEX, is India's first and most popular Stock Market benchmark index. Exchange traded funds (ETF) on SENSEX, are listed on BSE and in Hong Kong. Futures and options on the index are also traded at BSE. With its tradition of serving the community, BSE has been undertaking Corporate Social Responsibility (CSR) initiatives with a focus on Education, Health and Environment. BSE has been awarded by the World Council of Corporate Governance the Golden Peacock Global CSR Award for its initiatives in Corporate Social Responsibility (CSR). Other Awards:

The Annual Reports and Accounts of BSE for the year ended March 31, 2006 and March 31, 2007 have been awarded the ICAI awards for excellence in financial reporting. The Human Resource Management at BSE has won the Asia - Pacific HRM awards for its efforts in employer branding through talent management at work, health management at work and excellence in HR through technology

Drawing from its rich past and its equally robust performance in the recent times, BSE will continue to remain an icon in the Indian capital market.

NSE The National Stock Exchange (NSE) is India's leading stock exchange covering various cities and towns across the country. NSE was set up by leading institutions to provide a modern, fully automated screen-based trading system with national reach. The Exchange has brought about unparalleled transparency, speed & efficiency, safety and market integrity. It has set up facilities that serve as a model for the securities industry in terms of systems, practices and procedures. NSE has played a catalytic role in reforming the Indian securities market in terms of microstructure, market practices and trading volumes. The market today uses state-of-art information technology to provide an efficient and transparent trading, clearing and settlement mechanism, and has witnessed several innovations in products & services viz. demutualisation of stock exchange governance, screen based trading, compression of settlement cycles, dematerialisation and electronic transfer of securities, securities lending and borrowing, professionalisation of trading members, fine-tuned risk management systems, emergence of clearing corporations to assume counterparty risks, market of debt and derivative instruments and intensive use of information technology.

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NSE and NSCCL receive Asian Banker awards NSE has been awarded 'The Asian Banker Financial Derivative Exchange of the Year Award" NSCCL has been awarded 'The Asian Banker Clearing House of the Year Award" NSE awarded 'Derivative Exchange of the Year' The award recognizes best practice, quality service and innovation in derivatives and risk management in the Asia-Pacific region. The winning institutions are those that, over the past year, have responded best in the needs of their clients, both on the asset and liability side, along with the end-users that have demonstrated outstanding trading and risk management strategies.

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CHAPTER 2 LITERATURE REVIEW

34

Economic indicators can have a huge impact on the market; therefore, knowing how to interpret and analyze them is important for all investors. India economic indicators are important as they provide an accurate account of state Indian economy at various points of time. There are various types of Indian economic indicators that deal with different periods of time and there are others that deal with separate administrative divisions like states for example. They are important in context of analyzing Indian economy.

Arijit Ghosh and Samrat Roy, Assistant Professor, St. Xaviers College, Kolkata and Gautam Bandyopadhyay, Associate Professor, NIT, Durgapur (2005). The study examines the primary factors responsible for affecting Bombay Stock Exchange (BSE) in India. Further this paper attempts to investigate the relative influence of the factors affecting BSE and thereby categorizing them. It was found that dollar price along with Factor 1i.e; External Reserve and Factor score 2i.e; Inflation inertia are significantly affecting BSE Sensex. In the context of Indian economy the appreciation of Dollar will bring in more foreign exchange reserve which will act as stimulant to foster growth and in this process the injection of capital flows will affect Sensex. The fluctuations in Sensex due to Oil and CRR are significant. Any rise in Oil price will create inflation inertia which will generate stochasticity in Sensex. The External reserves taken together will act as resource generating Factor in attracting Foreign Capital inflows, which will make Sensex more sensitive.

The Hindu, Online Newspaper, Tuesday March 22, 2011. MUMBAI: Snapping its longest nine-day declining spell in a decade, the Bombay Stock Exchange sensitive index, Sensex, recovered 308 points on Friday to close at 18518 on all round buying at lower prices amid sharp fall in global crude oil prices.All sectoral indices finished with gains, surging between 0.33 per cent and 3.71 per cent. The most battered stocks recently banking, auto, IT, realty and capital goods were the major gainers. Oil marketing PSUs gained as crude prices slumped below $100 a barrel in the U.S. market. Brent crude, although still above $100 a barrel, also fell sharply. BPCL rose by 3.62 per cent to Rs. 665.50, HPCL by 2.83 per cent to Rs. 400.90, IOC by 2.63 per cent to Rs. 353.15 and Oil India by 1.62 per cent to Rs. 1,380.65.

Ovsiannykov Grygorii, Kyiv School of Economics (2010). This study compares the relative performance of direct, indirect and MIDAS volatility forecasting approaches to the widely used scaling approach based on the out-of-sample Mean Squared Forecasting Errors. Particularly, it investigates a robustness of MIDAS methodology on more volatile markets. Given lack of theoretical justification, the study carries out using empirical data for Poland, Ukraine and Russia stock indexes from 2002 to 2011. Based on GARCH(1,1) and linear MIDAS methodology quite unexpected conclusion that scaling method outperforms other more sophisticated models for weekly, biweekly and monthly horizon in terms of higher

35

volatility predictive ability can be drawn. Finally, there is evidence that linear MIDAS perform better than direct and indirect methods for less volatile environment

Sulaiman D. Mohammad (Associate professor, Federal Urdu University of Arts Science and Technology, Karachi), Adnan Hussain, Adnan Ali, M.Anwar Jalil(M.Phil Fellow, Applied Economics Research Centre, University of Karachi) (2009). The purpose behind this study was to explore the correlation among the macroeconomics variables and share prices of KSE (Karachi Stock Exchange) in context of Pakistan. The study consider several quarterly data for different macroeconomics variables such as foreign exchange reserve, foreign exchange rate, industrial production index (IPI), whole sale price index (WPI), gross fixed capital formation (GFCF) and broad money M2. These variables are obtained from the period 1986-2008. The result shows that after the reforms in 1991 the influence of foreign exchange rate and foreign exchange reserve significantly affect the stock prices, while other variables like IPI and GFCF are insignificantly affect stock prices. The result also highlighted the internal factors of firm like increase in production and capital formation insignificant while external factor like M2 and foreign exchange affect positively. .

The Hindu, Online Newspaper, Tuesday March 22, 2011. MUMBAI: After a wide-ranging movement, the Bombay Stock Exchange sensitive index ended in losses for the third straight session on Monday to 17830.05 from 17878.81 last Friday, as rising crude oil prices after US-led strikes on Libya raised inflationary concerns. Global stock markets, however, remained firm. The benchmark index opened higher and improved further to cross the 18000 mark, touching 18007.73 on strong Asian cues in afternoon deals. Stabilizing of the Fukushima atomic power plant in northeastern Japan, hit recently by earthquake and tsunami, aided the rebound in world stocks. However, air-strikes by Western forces on Libya as well as unrest in other neighboring countries pushed up global crude oil prices, which weighed on market sentiment and the Sensex closed at 17839.05,down 39.76 points.

Bologna and Cavallo (2002). In their present study uses a GARCH model to empirically evaluate the effects on volatility of the Indian spot market and to see that what extent the change (if any) could be attributed to the of introduction of index futures. BSE-200 and Nifty Junior are used as surrogate indices to capture and study the market wide factors contributing to the changes in spot market volatility. This gives a better idea as to: whether the

36

introduction of index futures in itself caused a decline in the volatility of spot market or the overall market wide volatility has decreased, and thus , causing a decrease in volatility of indices on which derivative products have been introduced. Finally, the studies in the Indian context have evaluated the trends in NSE and not on the Stock Exchange, Mumbai (BSE) for the reason that the turnover in NSE captures an overwhelmingly large part of the derivatives market. However, since the key issue addressed here is the volatility of the cash market as affected or unaffected by the derivative market, the importance of evaluating the trends in BSE as well was felt and the empirical analysis was carried out likewise

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CHAPTER 3 RESEARCH METHODOLGY

38

Objective of Research
PRIMARY OBJECTIVE :
To analyze the relationship of macroeconomic variables on stock market indices Sensex and how the market fluctuates.

SECONDARY OBJECTIVE :
1.To analyze the impact of statistically significant macroeconomic variable on the stock market indices that is to see the dependence of statistically significant macroeconomic variables on Sensex. 2.To build a model that helps in showing relationship between dependent & independent variables.

Research Methodology
It is an conclusive and descriptive research based on various economic variables and sensex movement in stock market. The aim is to find out the relation of macroeconomic variables an dstock market indices that will help the investors to take decision based on the prediction of stock market indices with the change in macroeconomic variables if the relationship exists between macroeconomic variable and stock market indices i.e. Sensex. For analysis the historical data of past 9 years is taken. This would facilitate to make comparison with macroeconomic variables & Sensex. So I would be able to identify the relation between these variables & Sensex movements as well as the dependence of Sensex. The research includes macroeconomic variables which are GDP, Inflation, Repo rate, Reverse Repo Rate, Foreign Exchange, Gold Prices, Crude oil prices. The aim is to find out the relation of macroeconomic variables in stock market indices that is on Sensex. This has to be done using correlation. The correlation helps to find out the macroeconomic variables that are significantly related to Sensex, the significantly correlated variables then selected for the regression analysis to find out the Regression model. The aim is to check that how many of them helps in driving sensex i.e. which are the variables on which Sensex is dependent from the above taken variable & to build a regression model which helps in forecasting the sensex value that will help the investors to take the decisions regarding the investment.

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Data Collection Method

Data collected is from Secondary Source. Data has been collected in a structured form on a monthly average basis from various websites considering them to be authenticated for various concerns of authentication and correct data which is necessary for good research.

Data Analysis Method

The analysis of data has been done both quantitatively & qualitatively and it is well supported by various graphs, data tables & appropriate statistical & financial tools. Various macroeconomic variables will be taken to find out its relationship with Sensex. So the historical data is used for all the macroeconomic variables & sensex to get a clear picture of relation between the two. The analysis of data is done by collecting the monthly data of various chosen macroeconomic variable & Sensex from year 2001 to 2009 and then calculating the yearly average. First the correlation analysis is done using SPSS by putting all variable values in SPSS and after that these variables checked for the significant correlation among the variables & the Sensex. To check significant relationship for correlation the hypothesis has to be checked which is Ho There is no correlation between Stock Market and Macroeconomic Variables. H1 There is correlation between Stock Market and Macroeconomic Variables. This hypothesis is checked through statistical procedure using SPSS. The Regression analysis is done on the variables which have the significant relationship with the Sensex. The dependent variable i.e. Sensex and the significant macroeconomic variables are used for regression analysis. The regression analysis method used is enter and further the stepwise to find out different model among the various models, the models which have the values for R, R square, S adjusted R square highest & statistically significant is the best model among various models. The normality curve & histogram is also made to show the results. The regression equation formed through this would be the best suited equation that can be used for forecasting. The investors can take the decision for Sensex based on the macroeconomic variables which helps in the decision making when any of the macroeconomic variable change.

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Data Analysis Steps

Data Analysis is done in various phases because different statistical tools are to be analyzed. Step 1 : Correlation Analysis is to be used to check for dependence with Sensex. The Multiple Correlation is also used to check if different microeconomic variables are related or not. If correlation is high then correlated macroeconomic variable will induce multicollinearity in the regression. Step 2 : Linear Regression is used significantly in correlated macroeconomic variables to find out sensex dependence on these variables. The variability is checked for significant dependence to find out how much they are guiding the variation in the model. To find out complete regression model that will help in predicting the model multiple regression has to be used. Step 3 : The multiple regression is used to find out how many of selected macroeconomic variable are used to build a model in which sensex is dependent on microeconomic variable. Step 4 : The model build is to be chosen based on R, R square & adjusted R square values to find out best suited model. Increasing values of these parameters gives the best result. The model build can be used for forecasting.

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CHAPTER 4 DATA ANALYSIS AND INTERPRETATION

42

The data analysis is done in various steps. In the first step, Correlation between Sensex and the macroeconomic variables is checked through each variable to find out that Is there a significant relationship exist between the sensex and the macroeconomic variable. In the step two, those macroeconomic variables having the significant relationship with sensex are used for Regression analysis. Then Regression analysis helps to build a model that helps in forecasting.

4.1.1 Data Analysis Using Correlation

The correlation analysis is used to find out the relationship strength between the variables, this means how the changes in one variable can be predicted by changes in the other variable. So the correlation is used to find out the strength of relation between the macroeconomic variables and the Sensex. Each variable is checked one by one to find out the significant relationship between macroeconomic variable and Sensex. The macroeconomic variables which have the significant relationship with the Sensex will then be used for finding the regression equations.

Correlation between Sensex and Gross Domestic Product

Table 4.1.1.1 : Correlation between Sensex and Gross Domestic Product

Correlations Sensex Sensex Pearson Correlation Sig. (2-tailed) N GDP Pearson Correlation Sig. (2-tailed) N 9 .725
*

GDP 1 .725
*

.027 9 1

.027 9 9

*. Correlation is significant at the 0.05 level (2-tailed).

The correlation reported in the Table 4.1.1 is positive. This suggests that sensex and GDP is showing a significant positive relationship that is with the increase in GDP, Sensex indices increase and vice versa. When the GDP of country increases that means income of country increases that will lead to increase in investments.

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Correlation between Sensex and Inflation Rate

Table 4.1.1.2 : Correlation between Sensex and Inflation Rate
Correlations Sensex Sensex Pearson Correlation Sig. (2-tailed) N Inflation Pearson Correlation Sig. (2-tailed) N 9 .844
**

Inflation .844
**

.004 9 1

.004 9 9

**. Correlation is significant at the 0.01 level (2-tailed).

Sensex and inflation rate is showing a significant positive relationship that is with the increase in inflation rate sensex indices increases and vice versa. With the rise in sensex, the masses would expect there will be a further rise in their profits. Due to this monetary gain in terms of their investments in stock markets, their demand for goods and services rises. There being a time-lag between the demand and supply which results in increase in price which causes inflation to increase.

Correlation between Sensex and Foreign Exchange Rate

Table 4.1.1.3 : Correlation between Sensex and Foreign Exchange Rate
Correlations ForeignExchang Sensex Sensex Pearson Correlation Sig. (2-tailed) N ForeignExchangeRate Pearson Correlation Sig. (2-tailed) N 9 -.368 .330 9 9 1 eRate -.368 .330 9 1

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Table 4.1.3 shows the relationship among the sensex and Forex rate. The Pearson correlataion coefficient measures the linear association betewwn two scale variables. The correlation reported in the Table 5.1.1 is negative. This suggests that Sensex and Forex rate is showing a significant negative relationship that is with the increase in forex rate, sensex indices decreases and vice-versa. This means when the rupees value against dollar depreciates the stock market goes up as the exports for the companies increases due to less cost.

Correlation between Sensex and Repo Rate

Table 4.1.1.4 : Correlation between Sensex and Repo Rate
Correlations Sensex Sensex Pearson Correlation Sig. (2-tailed) N Reporate Pearson Correlation Sig. (2-tailed) N 9 -.180 .642 9 9 1 Reporate -.180 .642 9 1

The correlation reported is negative. This suggest that repo rate isnt an appreciable effect on sensex. The reason for this may be that repo Rate is an indicator of rate at which central bank of country borrow money from other banks and the RBI uses this function to stop banks from infusing money to economy. This function may be used for very short period so that it will not affect the changes in the sensex.

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Correlation between Sensex and Reverse Repo Rate

Table 4.1.1.5 : Correlation between Sensex and Reverse Repo Rate

Correlations ReverseRepoR Sensex Sensex Pearson Correlation Sig. (2-tailed) N ReverseRepoRate Pearson Correlation Sig. (2-tailed) N 9 -.067 .864 9 9 1 ate -.067 .864 9 1

The correlation reported is negative, although not significantly different from 0 because the p-value 0.067 is greater than 0.010. This suggest that reverse repo rate isnt an appreciable effect on sensex. The reason for this may be that Reverse repo Rate is an indicator of rate at which central bank of country borrow money from other banks and the RBI uses this function to stop banks from infusing money to economy. This function may be used for very short period so that it will not affect the changes in the sensex. So this may be a possible reason so that the Reverse repo rate is not having significant relationship with sensex.

Correlation between Sensex and Cash Reserve Ratio

Table 4.1.1.6 : Correlation between Sensex and Cash Reserve Ratio

Correlations Sensex Sensex Pearson Correlation Sig. (2-tailed) N CRR Pearson Correlation Sig. (2-tailed) N 9 .040 .920 9 9 1 CRR .040 .920 9 1

The correlation reported in the Table 4.1.1.6 is positive. This suggests that sensex and CRR shows low significant positive relationship. CRR is function of central bank of India. If there

46

is increase in CRR that means deposits through the RBI increase and the money from the economy is sucked and the banks will not be able to give loans to the people as well as corporate. Here the relation is very less significant. So there will be chances that there may be no dependence of CRR on Sensex this will be checked by Regression analysis.

Correlation between Sensex and Gold Rate

Table 4.1.1.7 : Correlation between Sensex and Gold Rate

Correlations Sensex Sensex Pearson Correlation Sig. (2-tailed) N GoldPrices Pearson Correlation Sig. (2-tailed) N 9 .771
*

GoldPrices 1 .771
*

.015 9 1

.015 9 9

*. Correlation is significant at the 0.05 level (2-tailed).

The pearson correlation coefficient measures the linear association between two scale variables. The correlation reported in the Table 4.1.1.7 is positive. This suggest that sensex and gold rate is showing a significant positive relationship that is with the increase in gold rate, Sensex indices increase and vice versa.

Correlation between Sensex and Crude Oil Prices

Table 4.1.1.8 : Correlation between Sensex and Crude Oil Prices
Correlations Sensex Sensex Pearson Correlation Sig. (2-tailed) N CrudeOilPrices Pearson Correlation Sig. (2-tailed) N 9 .810
**

CrudeOilPrices 1 .810
**

.008 9 1

.008 9 9

47
Correlations Sensex Sensex Pearson Correlation Sig. (2-tailed) N CrudeOilPrices Pearson Correlation Sig. (2-tailed) N **. Correlation is significant at the 0.01 level (2-tailed). 9 .810
**

CrudeOilPrices 1 .810
**

.008 9 1

.008 9 9

The correlation reported in the table 4.1.1.8 is positive. This shows that sensex and oil prices is showing a significant positive relationship that is with the increase in oil prices, Sensex indices increase and vice versa. Increase in oil rate shows the increase in demand that means an economy is capable of using more quantity and economy is going well.

48

4.1.2 Multiple Correlations

The relationship of each macroeconomic variable with Sensex is checked with the help of correlation. It is also important to see the relationship among different macroeconomic variables because if the correlation among macroeconomic variables also exist then there will be chances for the multicollinearity to come into picture. This will affect the models that have to be built for forecasting. So, moving ahead with multiple correlation.

Table 4.1.2 : Multiple Correlation showing all macroeconomic variables with sensex
Correlations Foreign Exchange Sensex Sensex Pearson Correlation Sig. (2-tailed) N GDP Pearson Correlation Sig. (2-tailed) N Inflation Pearson Correlation Sig. (2-tailed) N Foreign Exchange Rate Pearson Correlation Sig. (2-tailed) N Reporate Pearson Correlation Sig. (2-tailed) N Reverse Pearson .642 9 -.067 .144 9 -.520 .914 9 -.030 .992 9 -.070 9 .964
**

Reverse Repo rate -.180 Repo Rate -.067 CRR .040 Gold Prices .771
*

Crude Oil Prices .810

**

GDP .725
*

Inflation .844
**

Rate -.368

.027 9 .725
*

.004 9 .801
**

.330 9 -.221

.642 9 -.528

.864 9 -.520

.920 9 -.052

.015 9 .858
**

.008 9 .842
**

9 1

.027 9 .844
**

.009 9 .801
**

.567 9 -.274

.144 9 -.042

.151 9 -.030

.894 9 .191

.003 9 .827
**

.004 9 .892
**

9 1

.004 9 -.368

.009 9 -.221 9 -.274

.475 9 1

.914 9 .004

.939 9 -.070

.623 9 -.025

.006 9 -.121

.001 9 -.587

.330 9 -.180

.567 9 -.528

.475 9 -.042 9 .004

.992 9 1

.859 9 .964
**

.949 9 .754
*

.757 9 -.254

.097 9 -.198

.000 9 1

.019 9 .730
*

.510 9 -.249

.610 9 -.151

Repo Rate Correlation Sig. (2-tailed) N .864 9 .151 9 .939 9 .859 9 .000 9 9 .026 9 .517 9 .698 9

49
CRR Pearson Correlation Sig. (2-tailed) N Gold Prices Pearson Correlation Sig. (2-tailed) N Crude Oil Prices Pearson Correlation Sig. (2-tailed) N .008 9 .004 9 .001 9 .097 9 .610 9 .698 9 .703 9 .035 9 9 .015 9 .810
**

.040

-.052

.191

-.025

.754

.730

.082

.148

.920 9 .771
*

.894 9 .858
**

.623 9 .827
**

.949 9 -.121

.019 9 -.254

.026 9 -.249 9 .082

.835 9 1

.703 9 .701
*

.003 9 .842
**

.006 9 .892
**

.757 9 -.587

.510 9 -.198

.517 9 -.151

.835 9 .148 9 .701

*

.035 9 1

*. Correlation is significant at the 0.05 level (2-tailed). **. Correlation is significant at the 0.01 level (2-tailed).

Table 4.1.2 results showing the multiple correlations of variables on each other. It is to see the dependence of a variable on each other. So it can be seen that their may be chances of multicollinearity as one independent variable is also having significant correlation over the other. There may be chances that if both the correlated variables will become the part of Regression equation they will affect each other. So there is needed to check the model fit between the variables for this multiple regression has to be used.

The linear regression is used to find out the one to one relationship among macroeconomic variable and sensex. The results of linear regression should be significant that is the model summary should be showing significant F Test values to show the significant dependence of sensex on macroeconomic variable. So proceeding with calculating the linear regression.

50

4.2.1 Linear regression

A linear regression is a statistical technique used to predict the behavior of dependent variable. Generally, a regression equation is of the form Y = a + bx +c, where Y is a dependent variable that the equation tries to predict, X is an independent variable that is being used to predict Y, a is the Y-intercept of the line, and c is the value called the regression residual. The values of a & b are so selected that the square of the regression residuals is minimized. The linear regression here is used to find the Sensex dependence on each significantly correlated variable.

Regression between sensex and Gross Domestic Product

Table 4.2.1.1 : Regression between sensex and Gross Domestic Product
Variables Entered/Removed
b

Model Variables Entered Variables Removed

dimension0

Method

GDP

. Enter

a. All requested variables entered. b. Dependent Variable: Sensex

Model Summary Model 1

dimension0

R .725
a

R Square .526

Adjusted R Square .458

Std. Error of the Estimate 4240.13634

a. Predictors: (Constant), GDP

ANOVA Model 1 Regression Residual Total a. Predictors: (Constant), GDP b. Dependent Variable: Sensex Sum of Squares 1.396E8 1.259E8 2.655E8 Df

Mean Square 1 7 8 1.396E8 1.798E7

F 7.767

Sig. .027
a

51

Coefficients Model Unstandardized Coefficients B 1 (Constant) GDP a. Dependent Variable: Sensex -6606.298 .057 Std. Error 5842.332 .021

Standardized Coefficients Beta T -1.131 .725 2.787 Sig. .295 .027

The regression is applied between sensex and GDP . The table 4.2.1.1 is showing R, the correlation coefficient, is the linear correlation between the observed model-predicted values of the dependent variable. Its large value indicates a strong relationship. R is 0.725 that is showing around 73% correlation between Sensex and Forex rate and also R square, the coefficient of determination, is the squared value of the multiple correlation coefficient. R square which is 0.526 that is only 53% of the variations are showing by this model. The significance value of the F statistic is less than 0.05, which means that the variation explained by the model is not due to chance. The Anova table is a useful test of the models ability to explain any variation in the dependent variable, it does not directly address the strength of that relationship.

Regression between sensex and Inflation rate

Table 4.2.1.2 : Regression between sensex and Inflation rate

Variables Entered/Removed Model 1

dimension0

Variables Entered Inflation

a

Variables Removed

Method . Enter

a. All requested variables entered. b. Dependent Variable: Sensex

52

Model Summary Model 1

dimension0

R .844
a

R Square .712

Adjusted R Square .670

Std. Error of the Estimate 3306.95480

a. Predictors: (Constant), Inflation

ANOVA Model 1 Regression Residual Total a. Predictors: (Constant), Inflation b. Dependent Variable: Sensex Sum of Squares 1.889E8 7.655E7 2.655E8 Df

Mean Square 1 7 8 1.889E8 1.094E7

F 17.277

Sig. .004
a

Coefficients Model Unstandardized Coefficients B 1 (Constant) Inflation -6043.516 2962.835 Std. Error 3827.621 712.816

Standardized Coefficients Beta T -1.579 .844 4.157 Sig. .158 .004

a. Dependent Variable: Sensex

The regression is applied between sensex and inflation rate . The table 4.2.1.2 is showing R, the correlation coefficient, is the linear correlation between the observed model-predicted values of the dependent variable. Its large value indicates a strong relationship. R is 0.844 that is shoing around 84% correlation between Sensex and Forex rate and also R square, the coefficient of determinantion, is the squared value of the multiple correlation coefficient. R square which is 0.712 that is only 71% of the variations are showing by this model. The significance value of the F statistic is less than 0.05, which means that the variation explained by the model is not due to chance. Beta value 0.84 is also significant.

53

Regression between sensex and Foreign Exchange rate

Table 4.2.1.3 : Regression between sensex and Foreign Exchange rate
Variables Entered/Removed Model 1
dimension0

Variables Entered ForeignExchangeRate

a

Variables Removed

Method . Enter

a. All requested variables entered. b. Dependent Variable: Sensex

Model Summary Model 1

dimension0

R .368
a

R Square .136

Adjusted R Square .012

Std. Error of the Estimate 5725.78275

a. Predictors: (Constant), ForeignExchangeRate

ANOVA Model 1 Regression Residual Total Sum of Squares 3.600E7 2.295E8 2.655E8 df

Mean Square 1 7 8 3.600E7 3.278E7

F 1.098

Sig. .330
a

a. Predictors: (Constant), ForeignExchangeRate b. Dependent Variable: Sensex

Coefficients Model

Standardized Unstandardized Coefficients B Std. Error 22428.427 515.737 -.368 Coefficients Beta T 1.454 -1.048 Sig. .189 .330

(Constant) ForeignExchangeRate

32608.219 -540.411

a. Dependent Variable: Sensex

The regression is applied between sensex and forex rate . The table 4.2.1.3 is showing R, the correlation coefficient, is the linear correlation between the observed model-predicted values

54

of the dependent variable. Its large value indicates a strong relationship. R is 0.368 that is showing around 37% correlation between Sensex and Forex rate and also R square, the coefficient of determination, is the squared value of the multiple correlation coefficient. R square which is 0.136 that is only 14% of the variations are showing by this model. The significance value of the F statistic is more than 0.05, which means that the variation explained by the model is due to chance. Beta value 0.37 is also significant.

Regression between sensex and Repo rate

Table 4.2.1.4 : Regression between sensex and Repo rate
Variables Entered/Removed Model Variables Entered 1
dimension0

Variables Removed

Method . Enter

Reporate

a. All requested variables entered. b. Dependent Variable: Sensex

Model Summary Model 1

dimension0

R .180
a

R Square Adjusted R Square Std. Error of the Estimate .033 -.106 6057.55282

a. Predictors: (Constant), Reporate

ANOVA Model 1 Regression Residual Total Sum of Squares 8631008.833 2.569E8 2.655E8 df 1 7 8

Mean Square 8631008.833 3.669E7

F .235

Sig. .642
a

a. Predictors: (Constant), Reporate b. Dependent Variable: Sensex

55

Coefficients Model Unstandardized Coefficients B 1 (Constant) Reporate 15687.308 -923.352 Std. Error 13543.912 1903.854

Standardized Coefficients Beta t 1.158 -.180 -.485 Sig. .285 .642

a. Dependent Variable: Sensex

The regression is applied between sensex and repo rate . The table 4.2.1.4 is showing R, the correlation coefficient, is the linear correlation between the observed model-predicted values of the dependent variable. Its large value indicates a strong relationship. R is 0.180 that is showing around 18% correlation between Sensex and Forex rate and also R square, the coefficient of determination, is the squared value of the multiple correlation coefficient. R square which is 0.133 that is only 13% of the variations are showing by this model. The significance value of the F statistic is more than 0.05, which means that the variation explained by the model is due to chance. Beta value 0.18 is also significant.

Regression between sensex and Reverse Repo Rate

Table 4.2.1.5 : Regression between sensex and Reverse Repo Rate

Variables Entered/Removed Model 1

dimension0

Variables Entered ReverseRepoRate

a

Variables Removed

Method

. Enter

a. All requested variables entered. b. Dependent Variable: Sensex

Model Summary Model 1

dimension0

R .067
a

R Square .005

Adjusted R Square -.138

Std. Error of the Estimate 6144.56766

a. Predictors: (Constant), ReverseRepoRate

56

ANOVA Model 1 Regression Residual Total Sum of Squares 1198649.955 2.643E8 2.655E8 df

Mean Square 1 7 8 1198649.955 3.776E7

F .032

Sig. .864
a

a. Predictors: (Constant), ReverseRepoRate b. Dependent Variable: Sensex

Coefficients Model

Standardized Unstandardized Coefficients B Std. Error 11869.261 2168.161 -.067 Coefficients Beta t .950 -.178 Sig. .374 .864

(Constant) ReverseRepoRate

11275.161 -386.319

a. Dependent Variable: Sensex

The regression is applied between sensex and reverse repo rate . The table 4.2.1.5 is showing R, the correlation coefficient, is the linear correlation between the observed model-predicted values of the dependent variable. Its large value indicates a strong relationship. R is 0.067 that is showing around 7% correlation between Sensex and Forex rate and also R square, the coefficient of determinantion, is the squared value of the multiple correlation coefficient. R square which is 0.005 that is only 0.5% of the variations are showing by this model. The significance value of the F statistic is more than 0.05, which means that the variation explained by the model is due to chance. Beta value 0.067 is also significant.

57

Regression between sensex and Cash Reserve Ratio

Table 4.2.1.6 : Regression between sensex and Cash Reserve Ratio
Variables Entered/Removed Model 1
dimension0

Variables Entered CRR

a

Variables Removed

Method

. Enter

a. All requested variables entered. b. Dependent Variable: Sensex

Model Summary Model R 1

dimension0

R Square
a

Adjusted R Square -.141 Std. Error of the Estimate 6153.66579

.040

.002

a. Predictors: (Constant), CRR

ANOVA Model 1 Regression Residual Total a. Predictors: (Constant), CRR b. Dependent Variable: Sensex Sum of Squares 415413.277 2.651E8 2.655E8 df

Mean Square 1 7 8 415413.277 3.787E7

F .011

Sig. .920
a

Coefficients Model Unstandardized Coefficients B 1 (Constant) CRR 8260.514 161.630 Std. Error 9127.329 1543.179

Standardized Coefficients Beta T .905 .040 .105 Sig. .396 .920

a. Dependent Variable: Sensex

58

The regression is applied between sensex and CRR . The table 4.2.1.6 is showing R, the correlation coefficient, is the linear correlation between the observed model-predicted values of the dependent variable. Its large value indicates a strong relationship. R is 0.040 that is showing around 4% correlation between Sensex and Forex rate and also R square, the coefficient of determination, is the squared value of the multiple correlation coefficient. R square which is 0.002 that is only 0.2% of the variations are showing by this model. The significance value of the F statistic is more than 0.05, which means that the variation explained by the model is due to chance. Beta value 0.040 is also significant.

Regression between sensex and Gold Rate

Table 4.2.1.7 : Regression between sensex and Gold Rate
Variables Entered/Removed Model 1
dimension0

Variables Entered GoldPrices

a

Variables Removed

Method

. Enter

a. All requested variables entered. b. Dependent Variable: Sensex

Model Summary Model R 1

dimension0

R Square
a

Adjusted R Square .537

Std. Error of the Estimate 3921.19396

.771

.595

a. Predictors: (Constant), GoldPrices

ANOVA Model 1 Regression Residual Total Sum of Squares 1.579E8 1.076E8 2.655E8 df

Mean Square 1 7 8 1.579E8 1.538E7

F 10.267

Sig. .015
a

a. Predictors: (Constant), GoldPrices b. Dependent Variable: Sensex

59

Coefficients Model Unstandardized Coefficients B 1 (Constant) GoldPrices a. Dependent Variable: Sensex 434.279 .980 Std. Error

Standardized Coefficients Beta T .143 .771 3.204 Sig. .890 .015

3029.690 .306

The regression is applied between sensex and gold rates . The table 4.2.1.7 is showing R, the correlation coefficient, is the linear correlation between the observed model-predicted values of the dependent variable. Its large value indicates a strong relationship. R is 0.771 that is showing around 77% correlation between Sensex and Forex rate and also R square, the coefficient of determination, is the squared value of the multiple correlation coefficient. R square which is 0.595 that is only 60% of the variations are showing by this model. The significance value of the F statistic is less than 0.05, which means that the variation explained by the model is not due to chance. Beta value 0.771 is also significant.

Regression between sensex and Crude Oil Prices

Table 4.2.1.8 : Regression between sensex and Crude Oil Prices
Variables Entered/Removed Model 1
dimension0

Variables Entered CrudeOilPrices

a

Variables Removed

Method

. Enter

a. All requested variables entered. b. Dependent Variable: Sensex

Model Summary Model 1

dimension0

R .810
a

R Square .657

Adjusted R Square .607

Std. Error of the Estimate 3609.18408

a. Predictors: (Constant), CrudeOilPrices

ANOVA

60
Model 1 Regression Residual Total Sum of Squares 1.743E8 9.118E7 2.655E8 df 1 7 8 Mean Square 1.743E8 1.303E7 F 13.381 Sig. .008
a

a. Predictors: (Constant), CrudeOilPrices b. Dependent Variable: Sensex

Coefficients Model

Standardized Unstandardized Coefficients B Std. Error 3078.350 1.340 .810 Coefficients Beta t -.381 3.658 Sig. .714 .008

(Constant) CrudeOilPrices

-1173.062 4.901

a. Dependent Variable: Sensex

The regression is applied between sensex and crude oil prices . The table 4.2.1.8 is showing R, the correlation coefficient, is the linear correlation between the observed model-predicted values of the dependent variable. Its large value indicates a strong relationship. R is 0.810 that is showing around 81% correlation between Sensex and Forex rate and also R square, the coefficient of determination, is the squared value of the multiple correlation coefficient. R square which is 0.657 that is only 66% of the variations are showing by this model. The significance value of the F statistic is less than 0.05, which means that the variation explained by the model is not due to chance. Beta value 0.810 is also significant.

GDP, Inflation rate, Gold Prices, and Crude Oil Prices are showing significant relationship out of each selected variable with the sensex. Now as the sensex is dependent on all these variable,s so its showing that more than one variable is dependent on sensex. So there is need to use the multiple regression to find out which of the macroeconomic variables can be used for predicting the sensex in multiple regression.

61

4.2.2 Multiple Regression

The multiple regression techniques help to construct various models that can be prepared based on multiple correlation. The multiple regression is used when more then one independent variable can derive the dependent variable. The multiple correlation is used in this regression as there may be relationship between the the independent variable. If multicollinearity enters the picture that means one independent variable is affecting other independent variable. So, the enter and to test further stepwise regression is used to find out the different model that can be used for forecasting the dependent variable.

4.2.2.1 Enter model of Linear Regression

Table 4.2.2.1(a) : Enter model of Linear Regression
Variables Entered/Removed Model Variables Entered 1
dimension0

Variables Removed Method . Enter

CRR, ForeignExchangeRate, GoldPrices, ReverseRepoRate, Inflation, Reporate, GDP

a

a. Tolerance = .000 limits reached. b. Dependent Variable: Sensex

Table 4.2.2.1(b) : Model Summary showing different model

Model Summary Model 1

dimension0

R .943
a

R Square .889

Adjusted R Square .110

Std. Error of the Estimate 5433.30773

Durbin-Watson 3.102

a. Predictors: (Constant), CRR, ForeignExchangeRate, GoldPrices, ReverseRepoRate, Inflation, Reporate, GDP b. Dependent Variable: Sensex

It shows value of R, R square and adjusted R square. R, the multiple correlation coefficient, is the linear correlation between the observed and model-predicted values of the dependent variable. Its large value indicates a strong relationship. R square, the coefficient of

62

determination, is the squared value of the multiple correlation coefficients. It shows that the variation in dependent variable is explained by the model. In particular at the adjusted Rsquare statistics, a model with extra predicators will always have a larger R-square, but the adjusted R-square compensates for model complexity to provide a more fair comparison of model performance.

Table 4.2.2.1(c) : Anova for different models

ANOVA Model 1 Regression Residual Total Sum of Squares 2.360E8 2.952E7 2.655E8 Df 7 1 8

Mean Square 3.371E7 2.952E7

F 1.142

Sig. .619
a

a. Predictors: (Constant), CRR, ForeignExchangeRate, GoldPrices, ReverseRepoRate, Inflation, Reporate, GDP

63
ANOVA Model 1 Regression Residual Total Sum of Squares 2.360E8 2.952E7 2.655E8 Df 7 1 8
b

Mean Square 3.371E7 2.952E7

F 1.142

Sig. .619
a

a. Predictors: (Constant), CRR, ForeignExchangeRate, GoldPrices, ReverseRepoRate, Inflation, Reporate, GDP

b. Dependent Variable: Sensex

The ANOVA Table 4.2.2.1(c) tests the acceptability of the model from a statistical perspective. The regression row displays information about the variation accounted for by model. The residual row displays information about the variation that is not accounted for by the model. The regression and residual sums of squares indicate about the variation in dependent variable is explained by the model. The significance t means more variation is address value of the F statistics is less than 0.05, which means that the variation explained by the model is not due to chance. While the ANOVA table is a useful test of the models ability to explain any variation in the dependent variable., it does not directly address the strength of that relationship. Here form the table it is found it is having significant F Test statistic that means the variation explained by the model is not due to chance. The model summary table reports the strength of the relationship between the model and the dependent variable. The model summary is already explained above.

Table 4.2.2.1(d) : Coefficient of different models

Coefficients Model Unstandardized Coefficients B 1 (Constant) GDP Inflation Reporate ReverseRepoRate ForeignExchangeRate GoldPrices CRR a. Dependent Variable: Sensex 15283.336 -.019 2513.901 -7302.263 7320.670 -133.559 .420 30.078 Std. Error 80344.494 .190 4926.256 9078.966 8605.629 587.333 1.054 4663.018 -.242 .716 -1.426 1.273 -.091 .331 .007
a

Standardized Coefficients Beta T .190 -.101 .510 -.804 .851 -.227 .399 .006 Sig. .880 .936 .700 .569 .551 .858 .758 .996

64

The coefficient table 4.2.2.1(d) helps to make a regression equation. The multiple regression equation is used when there are more than one independent variable that helps in forming equation. An example of multiple regression is as follows : Y = a + B1 X1 + B2 X2 + B3 X3 + Standard Error Where Y is an dependent variable, a is constant

B1, B2, B3 are the coefficients of independent variables X1, X2, x3

Table 4.2.2.1(e) : Excluded Variables in model

Excluded Variables Model

Collinearity Partial Beta In T

a

Statistics Tolerance 1.883E-7

Sig. . .

Correlation 1.000

CrudeOilPrices

768.410

a. Predictors in the Model: (Constant), CRR, ForeignExchangeRate, GoldPrices, ReverseRepoRate, Inflation, Reporate, GDP b. Dependent Variable: Sensex

Table 4.2.2.1(f) : Residuals Statistics of model

Residuals Statistics Minimum Predicted Value Residual Std. Predicted Value Std. Residual a. Dependent Variable: Sensex 1680.9504 -2836.02466 -1.383 -.522 Maximum 15403.3252 3201.93140 1.144 .589
a

Mean 9192.0422 .00000 .000 .000

Std. Deviation 5431.01969 1920.96437 1.000 .354

N 9 9 9 9

The Enter Method of multiple regression does not shows significant relationship between sensex and macroeconomic variables. So we move further to analyze the dependence of sensex and relation with the chosen variables through stepwise model of linear regression.

65

4.2.2.2 Stepwise model of Linear Regression

Table 4.2.2.2(a) : Stepwise model of Linear Regression

Variables Entered/Removed Model 1 Variables Entered Inflation Variables Removed

Method . Stepwise (Criteria: Probability-of-F-to-enter <= .050, Probability-of-F-to-remove >= .100).

dimension0

66
Variables Entered/Removed Model 1 Variables Entered Inflation Variables Removed
a

Method . Stepwise (Criteria: Probability-of-F-to-enter <= .050, Probability-of-F-to-remove >= .100).

dimension0

a.

Dependent Variable: Sensex

Table 4.2.2.2(b) : Model Summary showing different models

Model Summary Model 1

dimension0

R .844
a

R Square Adjusted R Square Std. Error of the Estimate .712 .670 3306.95480

a. Predictors: (Constant), Inflation

The above table 4.2.2.2(b) shows relation of only one variable with sensex through stepwise regression. The Sensex is significantly found dependent on Inflation Rate. The value of R is 84% which shows high degree of correlation. And the high value of R square tells sensex is 71% explained by Inflation Rate.

Table 4.2.2.2(c) : Anova for different models

ANOVA Model 1 Regression Residual Total Sum of Squares 1.889E8 7.655E7 2.655E8 df 1 7 8
b

Mean Square 1.889E8 1.094E7

F 17.277

Sig. .004
a

a. Predictors: (Constant), Inflation b. Dependent Variable: Sensex

67

Table 4.2.2.2(d) : Coefficient of different models

Coefficients Model Unstandardized Coefficients B 1 (Constant) Inflation -6043.516 2962.835 Std. Error 3827.621 712.816

Standardized Coefficients Beta t -1.579 .844 4.157 Sig. .158 .004

68
Coefficients Model Unstandardized Coefficients B 1 (Constant) Inflation a. -6043.516 2962.835 Std. Error 3827.621 712.816 .844
a

Standardized Coefficients Beta t -1.579 4.157 Sig. .158 .004

Dependent Variable: Sensex

Since its showing relationship with just one variable i.e. Inflation Rate, hence equation of regression line cannot be formed.

Table 4.2.2.2(e) : Excluded Variables in model

Excluded Variables Model

Collinearity Partial Beta In t

a a a a a a a

Statistics Tolerance .358 .998 .999 .925 .316 .205 .964

Sig. .382 -.686 -.191 -.674 .615 .601 -.579 .716 .518 .855 .526 .561 .570 .584

Correlation .154 -.270 -.078 -.265 .244 .238 -.230

GDP Reporate ReverseRepoRate ForeignExchangeRate GoldPrices CrudeOilPrices CRR

.138 -.145 -.042 -.148 .233 .283 -.126

a. Predictors in the Model: (Constant), Inflation b. Dependent Variable: Sensex

All above variables were found independent in relationship with sensex and hence excluded. GDP, CRR, Gold Rate, Crude Oil Prices are correlated with sensex but does not hold significant relationship with sensex which is analyzed and proved through multiple regression test. And since only inflation shows significantly related with sensex, hence no regression equation can be formed.

The relationship can be viewed pictorially through histogram and Normal P-P plot of Regression Residuals. The histogram should follow a normal curve and for normal P-P

69

CHAPTER 5 FINDINGS

70

Impact of macroeconomic variables on sensex has to be found out. The macroeconomic variables chosen are Cash Reserve Ration (CRR), Reverse Repo Rate, Gold Price, Oil Rate, Inflation Rate, Gross Domestic Product (GDP). The macroeconomic variables are first correlated with the sensex to check with their dependence with Sensex and then regression analysis was done to find out the significant relation between both and build the model to predict the empirical relationship between the two. The findings of the research are : There is significant dependence among the most of chosen variables. The Forex Rate, Repo Rate, Reverse Repo Rate are found independent with Sensex in correlation test. The one to one relationship is significant for each macroeconomic variable with the Sensex. So the multiple regression will help in forming a multiple regression model that includes the best suited macroeconomic variables. As the macroeconomic variables showing significant relationship with Sensex on linear regression but relationship is not significant in multiple regressions. So there may be multicollinearity present between the independent variables.

The multiple regression analysis through enter method showed only one variable i.e. Inflation Rate which is significantly correlated with sensex and shows a relationship. It was further tested through stepwise method. It was further tested through Stepwise Method. The result proved the relationship shown by enter method. And so no regression equation can be formed as there is only variable which holds significant relationship with sensex. The remaining macroeconomic variables i.e. GDP, Forex Rate, Repo Rate, Reverse Repo Rate, Gold Rate, Oil Prices found no significant in multiple regressions that is Sensex is not found dependent on these variables.

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CHAPTER 6 CONCLUSION

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In this modern economy the role of stock exchange is very important. It is very helpful to diversify the domestic funds and channels into productive investment; however it is very necessary that stock market have significant relationship with macroeconomic variables to perform this important task. Economic growth and prosperity of a country as well as individual is possible only when capital market works efficiently. After the globalization international capital markets are integrated rapidly and this has positive affects on economic growth, reducing the risk and especially contagion impact on financial crisis. An investor wants to know when he should invest to gain and also when he should divest not to loose his money. The study is done to help investors to invest in the market. The research helps to find out empirical relationship among various macroeconomic variables and stock market indices. The research helps the investor to predict changes in the stock market indices when macroeconomic variables change. So this research help investors to take investment decision based on Stock market indices. In my study I try to see the impact of macroeconomic variables on Sensex. Macroeconomic variables taken undr my study are Cash Reserve Ratio, Reverse Repo rate, Gold Price, Oil Rate, Inflation rate, Gross Domestic Product. This is first done with the help of correlation to see that are these macroeconomic variables are related with sensex. After this analysis it was found that except Reverse Repo Rate al other macroeconomic variables are realted to Sensex. As the first objective was to check the relation between macroeconomic variables and Sensex. So this objective is achieved. After that I moved to checking the dependence of significantly correlated variables on Sensex. So the linear regression was used to check that each significantly correlated variable are dependent or not on Sensex and also multiple correlation was done as there may be chances of high relation between the macroeconomic variables themselves and it was found that there are many macroeconomic variables that shows high correlation between them. So multiple regression was used to find out which macroeconomic variables are contributing towards building multiple regression equation and the result showed only Inflation Rate is it the significant macroeconomic variables that help in predicting empirical relationship among variables on sensex. This research helps the investor to predict changes in the stock market indices when macroeconomic variables changes.

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APPENDICES
Table A.1 showing Sensex on a monthly average basis for the years 2001 to 2009. The data is taken from the reserve bank of India website.

2001 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec
4326.72 4247.04 3604.38 3519.16 3631.91 3456.78 3329.28 3244.95 2811.6 2989.35 3287.56 3262.33

2002
3311.03 3562.31 3469.35 3338.16 3125.73 324.7 2987.65 3181.23 2991.36 2949.32 3228.82 3377.28

2003
3250.38 3283.66 3048.72 2959.79 3180.75 3601.13 3792.61 4244.73 4453.2 4906.87 5044.82 5838.96

2004
5695.67 5667.51 5590.6 5655.09 4759.62 4795.46 5170.32 5192.08 5583.61 5672.27 6234.29 6602.69

2005
7635.42 7805.43 8634.48 7892.32 8788.81 9397.93 6555.94 6713.86 692.82 6154.44 6715.11 7193.85

2006 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec
99919.89 10370.24 11279.96 1202.56 10398.61 10609.25 10743.88 11699.05 12454.42 12961.9 13696.31 13786.91

2007
14090.92 12938.09 13072.1 13872.37 1454.46 14650.51 15550.99 15318.6 17291.1 19837.99 19363.19 20286.99

2008
17648.71 17578.72 15644.44 17287.31 16415.57 13461.6 14355.75 14564.53 12860.43 9788.06 9092.72 9647.31

2009
9424.24 8891.61 9708.5 11403.25 14625.25 14493.84 15670.31 15666.6 17126.84 15896.28 16926.22 1746.81

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Table A.2 showing GDP on a monthly average basis for the years 2001 to 2009. The data is taken from the database of Indian Economy from the reserve bank of India website

2001 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec
188666.7 188666.7 188666.7 176971.3 176971.3 176971.3 173251.3 173251.3 173251.3 205152.7 205152.7 205152.7

2002
204275.3 204275.3 204275.3 191482 191482 191482 189461.3 189461.3 189461.3 216864.3 216864.3 216864.3

2003
220379.3 220379.3 220379.3 209566 209566 209566 210512.3 210512.3 210512.3 249370 249370 249370

2004
248759 248759 248759 236936 236936 236936 244715 244715 244715 244353.3 244353.3 244353.3

2005
253088.7 253088.7 253088.7 286542.7 286542.7 286542.7 295757 295757 295757 280416 280416 280416

2006 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec
285912 285912 285912 280424.7 280424.7 280424.7 287726.7 287726.7 287726.7 270461.7 270461.7 270461.7

2007
275125.7 275125.7 275125.7 319535 319535 319535 330459.3 330459.3 330459.3 304395.7 304395.7 304395.7

2008
318806 318806 318806 368431.3 368431.3 368431.3 384758 384758 384758 354201.3 354201.3 354201.3

2009
360143 360143 360143 418831.7 418831.7 418831.7 441290.7 441290.7 441290.7 411808.7 411808.7 411808.7

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Table A.3 showing Inflation Rate on a monthly average basis for the years 2001 to 2009. The data is taken from the database of Indian Economy from the reserve bank of India website

2001 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec
3.23 3.23 3.23 2.13 2.11 2.11 4.21 4.17 5.21 0.17 4.12 5.15

2002
5.21 5.21 5.21 5.21 4.12 5.15 4.04 4 3.96 5 3.96 3.92

2003
3.96 2.97 3.96 3.96 4.95 4.9 3.88 3.85 2.86 2.86 3.81 2.83

2004
2.86 4.81 3.81 3.81 2.83 2.8 3.73 3.7 4.63 4.63 4.59 3.67

2005
4.63 4.59 3.67 3.67 4.59 3.64 2.7 3.57 3.54 3.54 3.51 5.31

2006 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec
5.31 4.39 5.31 5.31 5.26 6.14 7.89 6.9 5.98 6.84 7.63 6.72

2007
6.72 6.72 7.56 6.72 6.67 6.61 5.69 6.45 7.26 6.4 5.51 5.51

2008
5.51 5.51 5.47 7.87 7.81 7.75 7.69 8.33 9.02 9.77 10.45 10.45

2009
9.7 10.45 9.63 8-Jan 8.7 8.63 9.29 11.89 11.72 11.64 11.49 13.51

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Table A.4 showing Foreign Exchange on a monthly average basis for the years 2001 to 2009. The data is taken from the database of Indian Economy from the reserve bank of India website

2001 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec
46.54 46.54 46.54 46.54 46.54 46.54 47.14 47.13 47.64 48.02 47.99 47.92

2002
48.33 48.69 48.74 48.92 49 48.97 48.76 48.59 48.44 48.37 48.25 48.14

2003
47.33 47.73 47.64 47.38 47.08 46.71 46.23 45.93 45.85 45.39 45.52 5.59

2004
45.46 45.27 45.02 43.93 45.25 45.51 46.04 6.34 46.09 45.78 45.13 43.98

2005
43.75 43.68 43.69 43.79 43.49 43.58 3.54 43.62 43.91 44.82 45.73 45.64

2006 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec
44.4 44.33 44.48 4.95 45.41 46.06 46.46 46.5 46.12 45.47 44.85 44.64

2007
44.33 44.16 4.03 42.45 40.78 40.77 40.41 40.82 40.34 39.81 39.44 39.44

2008
39.37 39.73 40.36 40.02 42.13 42.82 42.84 42.94 45.56 48.66 49 48.63

2009
48.83 49.26 51.23 50.06 48.53 47.77 48.48 48.34 48.34 46.72 46.57 46.63

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Table A.5 showing Reverse Repo Rate on a monthly average basis for the years 2001 to 2009. The data is taken from the database of Indian Economy from the reserve bank of India website

2001 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec
8 8 7.5 7 6.75 6.5 6.5 6.5 6.5 6.5 6.5 6.5

2002
6.5 6.5 6.5 6 6 6 5.75 5.75 5.75 5.75 5.5 5.5

2003
5.5 5.5 5 5 5 5 5 5 4.5 4.5 4.5 4.5

2004
4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.75 4.75

2005
4.75 4.75 4.75 4.75 5.5 5 5 5 5 5 5.25 5.25

2006 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec
5.25 5.25 5.5 5.5 5.5 5.5 5.75 6 6 6 6 6

2007
6 6 6 6 6 6 6 6 6 6 6 6

2008
6 6 6 6 6 6 6 6 6 6 6 6

2009
5 4 4 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25

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Table A.6 showing CRR on a monthly average basis for the years 2001 to 2009. The data is taken from the database of Indian Economy from the reserve bank of India website

2001 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec
8.5 8.5 8.5 8.5 8.5 8.5 8.5 8.5 8.5 8.5 8.5 8.5

2002
5.5 5.5 5.5 5.5 5.5 5 5 5 5 5 4.75 4.75

2003
4.75 4.75 4.75 4.75 4.75 4.5 4.5 4.5 4.5 4.5 4.5 4.5

2004
4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.75 5 5 5

2005
5 5 5 5 5 5 5 5 5 5 5 5

2006 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec
5 5 5 5 5 5 5 5 5 5 5 5.5

2007
5.5 5.75 6 6.37 6.37 6.37 6.37 7 7 7 5.75 5.75

2008
7.5 7.5 7.5 7.75 8.13 8.13 8.67 9 9 7 5.75 5.75

2009
5 5 5 5 5 5 5 5 5 5 5 5

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Table A.7 showing Gold Rate on a monthly average basis for the years 2001 to 2009. The data is taken from the database of Indian Economy from the reserve bank of India website

2001 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec
4465.58 4369.57 4268.6 4267.17 4440.58 4400.2 4379.58 4448.64 4631.3 4687.6 4603.96 4576.46

2002
4692.69 4901.04 4920.21 5040.63 5225.8 5313.2 5187.5 5129.2 5239.05 5210.4 5242.92 5443.6

2003
5752.04 5771.3 5432.71 5191.6 5560.77 5509.4 5362.5 5462.17 5718.4 5695.19 5850 6094.07

2004
6179.04 6107.73 5986.48 5915.8 5736.46 5862.12 6059.42 6125.8 6170.43 6360.83 6550.83 6444.62

2005
6148.6 6107.5 6262.2 6150.58 6030.38 6134.23 6058.26 6249 6534.6 6873.8 7167.7 7585.93

2006 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec
7925 8038.04 8059.4 8984.77 9969.39 8951.92 9559 9468.93 8998.2 8694.86 9139.92 9133.13

2007
9069.17 9545 93696 9321.09 8878.13 8707.42 8741.35 8835.58 9310.96 9690.96 10340.38 10311

2008
11290.96 11887.83 12631.74 11810.42 12143 12353 13027.96 11860.64 12220.28 12690.87 12142.92 12922.6

2009
13472.8 14800.22 15232.2 14474.57 14620.83 14638.85 14720.37 14952.08 14722.61 15882.39 17056.8 17159.42

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Table A.8 showing Crude Oil Prices on a monthly average basis for the years 2001 to 2009. The data is taken from the database of Indian Economy from the reserve bank of India website

2001 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec
1333.84 1242.01 1117.02 1252.3 1193.64 1140.69 1111.56 113.89 991.86 914.3 789.44 776.78

2002
804.69 919.27 1022.08 1116.84 1165.71 1085.18 1155.12 1209.89 1273 1227.63 1105.89 1215.54

2003
1411.06 1533.56 1441.59 1194.92 1111.56 1271.91 1266.24 1301.2 1152.67 1228.71 1259.08 1314.36

2004
1403.35 1404.73 1507.27 1453.2 1643.03 1538.24 1668.95 1884.65 1901.21 2229.94 1999.26 1724.02

2005
1846.69 1795.68 2088.38 2030.98 1870.94 2170.28 2269.74 2533.01 2571.37 2470.48 2340.46 2387.43

2006 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec
2588.52 2422.63 2465.08 2809.38 2858.11 2894.87 3079.37 3021.84 2570.27 2318.06 2286.45 2413.24

2007
2062.67 2268.06 2317.74 2380.6 2260.44 2415.62 2665.44 2621.87 2861.72 308.66 3333.21 3150.33

2008
3334.64 3442.21 3909.67 4174.49 4946.06 5409.45 5404.69 4657.27 4379.68 3333.21 2415.21 1601.87

2009
1614.81 1529.03 2043.05 2112.53 2476 2935.94 2711.64 3035.75 2953.87 3150.33 3233.36 3092.97

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