abhishek rai dissertation

7/31/2019 Abhishek Rai Dissertation

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TECHNICAL ANALYSIS- A TOOL FOR TRADING DECISIONS

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CHAPTER-1

(INTRODUCTION)


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1.1 INTRODUCTION TO SECURITIES MARKET

The industrial securities market, particularly the equities market, occupies a

disproportionately large space in the print and electronic media. The industry,

business, rich and middle classes tend to be highly preoccupied with this market, and

regard it as the barometer of the health of the economy. They frequently stress the

essentiality of the growth and spread of what has come to be called the equity culture

or equity cult or risk capital for faster industrial growth.

1.1.1 ORGANISATION AND STRUCTURE

1.1.1.1 Bombay Stock Exchange (BSE) The BSE is the premier or apex stock

exchange in India. It is the biggest in size in terms of the amount of fresh capital

raised, secondary market turnover and capitalization and the total listed companies

and their paid-up capital. It is also the oldest market and has been recognized

permanently, while the recognition for other exchanges is renewed every five years.

1.1.1.2 National Stock Exchange of India The NSEI has a fully automated,

electronic, screen based trading system. It is sponsored by the IDBI and

cosponsored by other term-lending institutions etc. Its objectives are:

1.1.1.1.1 to provide nation-wide equal access and fair, efficient, completely

transparent securities trading system to investors by using suitable communication

network.

1.1.1.1.2 to provide shorter settlement cycles and book entry settlement system.

1.1.1.1.3 to bring the Indian stock market in line with international markets.


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1.1.1.1.4 to promote secondary market in debt instruments such as government and

corporate bonds.

1.1.2 It has two separate segments:

1.1.2.1 The wholesale debt market segment (WDMS) which caters to banks, financial

institutions, and other institutional participants, and which deals in PSU bonds, units,

TBs, government securities etc.

1.1.2.2 The capital market segment (CMS) which deals in equities, convertible

debentures, etc. These include securities that are traded on other stock exchanges.

1.1.3 Over the Counter Exchange of India - It was set up in 1992 and was the first

stock exchange in India to introduce screen based automated ringless trading

system. It is promoted by UTI, ICICI, IFCI, LIC, GIC etc with headquarters at

Mumbai. Its objectives are:

1.1.3.1 to help companies to raise capital from the market at the cheapest costs and on

optimal terms;

1.1.3.2 to help investors to access capital market safely and conveniently;

1.1.3.3 to cater the needs of the companies which cannot be listed on other official

exchanges;

1.1.3.4 to eliminate the problems of illiquid securities, delayed settlements, and unfair

prices faced by the investors.

The securities which are traded on OTCEI are divided into three categories:

listed, permitted and initiated.


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These securities cannot be traded on other stock exchanges. However, they can be

bought and sold at any of the OTCEI counters all over India.

1.2 INTRODUCTION TO TECHNICAL ANALYSIS

Financial markets, by their very nature, attract a wealth of high-caliber individuals

who are genuinely excited by their chosen profession. Their enthusiasm and

willingness to share their knowledge makes belonging to the community of traders,

investors, and analysts a great privilege. Most of these individuals are successful

because they recognize, in a way that academic analysis still does not, that asset price

movements are not just random fluctuations driven by the rational behavior of

independent traders. They recognize that human beings are, by nature, gregarious and

communicative, and have an inner drive to belong to groups. Not surprisingly,

therefore, group psychology provides a controlling influence over individual activity

and transforms a large quantity of apparently unrelated decisions into a more certain

outcome. Importantly, this outcome reveals itself in the form of rhythmic, patterned,

price movements that bear not only a natural relationship to one another but also are

essentially predictable once they are understood. This is why the discipline of

technical analysishearing the message of the market via price movementsis such

an accurate tool for making profitable trading decisions.

Furthermore, since markets essentially attempt to anticipate movements in

economic and social fundamentals, the accurate use of technical analysis actually

implies an ability to predict those fundamentals. This is why technical analysis is such

an important tool for making investment decisions.


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Technical analysis is the use of numerical series generated by market

activity, such as price and volume, to predict future price trends. The techniques

applied to any market with a comprehensive price history.

Primarily, but not exclusively, technical analysis is conducted by studying

charts of past price movement. Many different methods and tools are used in technical

analysis, but they all rely on the assumption that price patterns and trends exist in

markets, and that they can be identified and exploited Technical analysis does not try

to analyze the financial data of a company such as cash flow, dividends and projection

of future dividends. That type of analysis is called Fundamental analysis. Nor does it

claim to be 100% accurate. It attempts to give the "most likely" outcome.

Some speculators combine elements from both technical and fundamental

analysis. Technical analysis is viewed by many of its practitioners as more art than

science. Many academic studies conclude that technical analysis has little, if any,

predictive power. However, the practice has a dedicated following especially among

active traders and does have support amongst the academic community.

As an example of the debate regarding the efficacy of technical analysis,

Peter Lynch, a very well-known and successful fundamental analyst, once

commented, "Charts are great for predicting the past." On the other hand, the U.S.

Federal Reserve once published a study saying that certain elements of technical

analysis were effective in price forecasting.

The premises of technical analysis were derived from empirical

observations of financial markets over hundreds of years. Perhaps the oldest branch of

technical analysis is the use of candlestick techniques by Japanese traders at least as


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early as the 18th century, and still very popular today. Dow Theory, a theory based on

the collected writings of Dow Jones co-founder and Editor Charles Dow, inspired the

increasingly widespread use and development of technical analysis from the end of

the 19th century. Modern technical analysis considers Dow Theory its cornerstone.

New tools and theories have been produced and existing tools have been enhanced at

a rapid rate in recent decades, with an increasing emphasis on computer-assisted

techniques.

Technical analysis is not concerned with why a price is moving but rather

whether it is moving in a particular direction or in a particular chart pattern. Technical

analysts believe that profits can be made by "trend following." In other words if a

particular stock price is steadily rising (trending upward) then a technical analyst will

look for opportunities to buy this stock. Until the technical analyst is convinced this

uptrend has reversed or ended, all else equal, he will continue to own this security.

Additionally, technical analysts look for various price patterns to form on a price chart

and will take positions in anticipation of the expected move following that pattern.

The various tools of technical analysis assist the technician in determining when

trends have formed, ended, etc. and when particular patterns are unfolding.

Technical analysis may be at odds with fundamental analysis.

Fundamental analysis maintains that markets may misprice a security and, through

various methods of fundamental analysis, the "correct" price can be calculated. Profits

can be made by trading the mispriced security and then waiting for the market to

recognize its "mistake" and reprise the security. In contrast, a technical analyst is not

interested in a security's "correct" price, only in price movement.


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The beauty of technical analysis lies in its versatility. Because the

principles of technical analysis are universally applicable, each of the analysis steps

above can be performed using the same theoretical background. You don't need an

economics degree to analyze a market index chart. You don't need to be a specialist to

analyze a stock chart. It does not matter if the time frame is 2 days or 2 years. It does

not matter if it is a stock, market index or commodity. The technical principles of

support, resistance, trend, trading range and other aspects can be applied to any chart.

While this may sound easy, technical analysis is by no means easy. Success requires

serious study, dedication and an open mind. One of the forecasting tools very popular

among practitioners is technical analysis. Technical analysis is the examination of

past price movements in order to forecast future price movements. Technical analysis

is open to interpretation. Many times two technicians will look at the same chart and

paint two different scenarios or see different patterns. Both would be able to come up

with logical support to justify their position.

In addition, even if stock prices completely followed a random walk,

people would be able to convince themselves that there are patterns having a

predictive value. It has become more and more popular, as it offered an unlimited set

of tools and signals and seemed to be an interesting method of market analysis. It has

been proven that stock prices most of the time approximately follow a random walk

pattern. Psychologists have described a number of ways in which people deal with

randomness. Additionally, market participants may be subject to herd behavior.

Technical analysis is applicable to stocks, indices, commodities, futures or

any tradable instrument where the price is influenced by the forces of supply and

demand. Price refers to any combination of the open, high, low, or close for a given


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security over a specific time frame. The time frame can be based on intraday (1-

minute, 5-minutes, 10-minutes, 15-minutes, 30-minutes or hourly), daily, weekly or

monthly price data and last a few hours or many years. In addition, some technical

analysts include volume or open interest figures with their study of price action.

1.3 MEANING

The word technical comes from the Greek technikos, relating to art or

skillful. Technical analysis is the study of any market that uses price and volume

information only in order to forecast future price movement and trends. Technical

analysts and technically oriented investors or traders rely on historical and current

price and volume information only. Some other, related, statistical information is

often considered part of technical analysis.

1.4 ASSUMPTIONS IN TECHNICAL ANALYSIS

1.4.1. The Market Discounts everything - A major criticism of technical analysis is

that it only considers price movement, ignoring the fundamental factors of the

company. However, technical analysis assumes that, at any given time, a stock's price

reflects everything that has or could affect the company - including fundamental

factors. Technical analysts believe that the company's fundamentals, along with

broader economic factors and market psychology, are all priced into the stock,

removing the need to actually consider these factors separately. This only leaves the

analysis of price movement, which technical theory views as a product of the supply

and demand for a particular stock in the market.

1.4.2. Price Moves in Trends - In technical analysis, price movements are believed

to follow trends. This means that after a trend has been established, the future price


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movement is more likely to be in the same direction as the trend than to be against it.

Most technical trading strategies are based on this assumption.

1.4.3. History Tends To Repeat It-self- Another important idea in technical analysis

is that history tends to repeat itself, mainly in terms of price movement. The repetitive

nature of price movements is attributed to market psychology; in other words, market

participants tend to provide a consistent reaction to similar market stimuli over time.

Technical analysis uses chart patterns to analyze market movements and understand

trends. Although many of these charts have been used for more than 100 years, they

are still believed to be relevant because they illustrate patterns in price movements

that often repeat themselves.

1.5 FUNDAMENTAL Vs. TECHNICAL ANALYSIS

Technical analysis and fundamental analysis are the two main schools of thought in

the financial markets. As we've mentioned, technical analysis looks at the price

movement of a security and uses this data to predict its future price movements.

Fundamental analysis, on the other hand, looks at economic factors, known as

fundamentals. The Differences:

1.5.1 Charts vs. Financial Statements - At the most basic level, a technical analyst

approach a security from the charts, while a fundamental analyst starts with the

financial statements. By looking at the balance sheet, cash flow statement and income

statement, a fundamental analyst tries to determine a company's value. In financial

terms, an analyst attempts to measure a company's intrinsic value. Technical traders,

on the other hand, believe there is no reason to analyze a company's fundamentals

because these are all accounted for in the stock's price. Technicians believe that all the

information they need about a stock can be found in its charts.


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1.5.2 Time Horizon - Fundamental analysis takes a relatively long-term approach to

analyzing the market compared to technical analysis. While technical analysis can be

used on a timeframe of weeks, days or even minutes, fundamental analysis often

looks at data over a number of years.

1.5.3 Trading versus Investing - Not only is technical analysis more short term in

nature that fundamental analysis, but the goals of a purchase (or sale) of a stock are

usually different for each approach. In general, technical analysis is used for a trade,

whereas fundamental analysis is used to make an investment. Investors buy assets

they believe can increase in value, while traders buy assets they believe they can sell

to somebody else at a greater price.

1.6 CRITICISMS OF TECHNICAL ANALYSIS

1.6.1 Analyst Bias- Just as with fundamental analysis, technical analysis is subjective

and our personal biases can be reflected in the analysis. It is important to be aware of

these biases when analyzing a chart. If the analyst is a perpetual bull, then a bullish

bias will overshadow the analysis. On the other hand, if the analyst is a disgruntled

eternal bear, then the analysis will probably have a bearish tilt.

1.6.2 Open to Interpretation- Furthering the bias argument is the fact that technical

analysis is open to interpretation. Even though there are standards, many times two

technicians will look at the same chart and paint two different scenarios or see

different patterns. Both will be able to come up with logical support and resistance

levels as well as key breaks to justify their position. While this can be frustrating, it

should be pointed out that technical analysis is more like an art than a science,

somewhat like economics. Is the cup half-empty or half-full? It is in the eye of the

beholder.


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1.6.3 Too Late- Technical analysis has been criticized for being too late. By the time

the trend is identified, a substantial portion of the move has already taken place. After

such a large move, the reward to risk ratio is not great. Lateness is a particular

criticism of Dow Theory.

1.6.4 Always another Level- Even after a new trend has been identified, there is

always another "important" level close at hand. Technicians have been accused of

sitting on the fence and never taking an unqualified stance. Even if they are bullish,

there is always some indicator or some level that will qualify their opinion.

1.6.5 Trader's Remorse - Not all technical signals and patterns work. When you

begin to study technical analysis, you will come across an array of patterns and

indicators with rules to match. For instance: A sell signal is given when the neckline

of a head and shoulders pattern is broken. Even though this is a rule, it is not steadfast

and can be subject to other factors such as volume and momentum. In that same vein,

what works for one particular stock may not work for another. A 50-day moving

average may work great to identify support and resistance for IBM, but a 70-day

moving average may work better for Yahoo. Even though many principles of

technical analysis are universal, each security will have its own idiosyncrasies.

1.6.6 Lack of evidence - Although chartists assert that their techniques provide

excess returns over time, this assertion is controversial. Many academics believe that

technical analysis has no predictive power. Burton Malkiel in his book "A Random

Walk Down Wall Street" (8th edition, 2003) and Eugene Fama in "Efficient Capital

Markets: A Review of Theory and Empirical Work," May 1970 Journal of Finance

summarize many early studies, conducted from the 1950s-70s, that show that after

trading costs are considered, the returns generated by many technical strategies under


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perform a simple buy and hold strategy. Critics of technical analysis include well

known fundamental analysts. Warren Buffett has exclaimed, "I realized technical

analysis didn't work when I turned the charts upside down and didn't get a different

answer" and "If past history was all there was to the game, the richest people would

be librarians."

1.7 CONCEPT OF TREND

Just as the market tends to have three phases related to mood or market

sentiment, market trends can also be divided. Trend is nothing but the direction of

movement of share prices. The three types of trend being:

1.7.1 Primary trend

1.7.2 Secondary trend

1.7.3 Sideways or flat trend

The most important to investors, those who look to buy and hold stocks for as long as

a stock is tending to command an increasing price over timeis the primary or major

trend. The primary or major trend is a price movement that usually lasts for a year or

more. A primary up trend is considered to be a bull market and a primary down trend,

a bear market. Secondary trends are of a shorter durationtypically, three weeks to

three monthsand interrupt the major direction of stock prices with a countertrend

movement. Such moves are also called corrections in a bull market as they correct the

situation where prices have risen too far, too fast. Secondary rallies are also called

recovery rallies in a bear market. Sideways trend are of a very short duration and last

from anything less than two or three weeks. The sideways trend phases are also

referred to as trendless phases.


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1.8 CONCEPT OF SUPPORT AND RESISTANCE

Support often refers to a prior low in price and is a price point or area where there is

anticipated buying interest based on what happened in the past. Support is a price

level at or below the current level of an index, stock, or other financial instrument.

Resistance is a price area where sufficient selling develops to push prices lower and to

resist the buying pressure. Resistance is a price level at or above the current level of

an index, stock, or other financial instrument. Resistance is often a prior upswing high

or series of highs.

1.9 TRENDLINES AND THEIR VARIATIONS

A trend-line is one of the most basic and useful tools in assessing trends or trend

reversals in stocks, stock averages, and other financial instruments. A trend-line is, as

the name implies, a line that attempts to measure and define a price trend in any

market that involves prices set by the free actions of buyers and sellers. It is also by

definition a line that either slopes up or down to some degree in keeping with the

primary definition of a trend as having a predominant up or down price direction.

1.10 STOP-LOSS

One important dimension of any trading system is the ability to keep losses small.

This is most of the times achieved with the use of STOP-LOSS. It is a price level or a

mechanism that forces a trader to take/book losses in a losing position instead of

letting them grow any bigger. Ideally a Stop-loss level should be decided as soon as a

trade is executed. If a stock say ABC is bought at Rs.50, Stop-loss for it can be kept at

a price level somewhat lower than Rs.50. It can be 49, 48, 47 or even Rs.35. Let us

assume the Stop-loss is kept at Rs.35. This means if the price of ABC, after buying it

for Rs.50 goes below Rs.35 one should close the position by selling it. Rs.15 is the


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loss the buyer is limiting himself to. This might be little confusing for novice traders

because it involves closing a position willingly at a loss! Remember: In a long

position, the Stop-loss price is usually lower than the entry price.

Likewise if a trader shorts ABC stocks at Rs.50, he should keep a Stop-loss at any

price higher than Rs.50. Say if it was kept at Rs.65 this means if the price moves up

contrary to the initial expectations of it going down, and touches Rs.65, one should

call it a quit and square up the position. Thus, in a short sell, the Stop-loss price is

higher than the price at which the stock was sold.

1.11 TECHNICAL INDICATORS

Technical analysis makes extensive use of various mathematical models or studies to

show various aspects of price activity, such as ones measuring momentum, or the rate

of price increase or change. These models are generally called technical indicators

or simply indicators. The goals in using indicators are to better identify current and

emerging trends and the points subject to trend reversals, in order to increase

profitable investing and trading decisions and decrease unprofitable ones.

A technical indicator is a series of data points that are derived by applying a formula

to the price data of a security. Price data includes any combination of the open, high,

low or close over a period of time. Some indicators may use only the closing prices,

while others incorporate volume and open interest into their formulas. The price data

is entered into the formula and a data point is produced.

1.11.1 Indicators serve three broad functions: to alert, to confirm and to predict.

1.11.1.1 An indicator can act as an alert to study price action a little more closely. If

momentum is waning, it may be a signal to watch for a break of support. Or, if there


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is a large positive divergence building, it may serve as an alert to watch for a

resistance breakout.

1.11.1.2 Indicators can be used to confirm other technical analysis tools. If there is a

breakout on the price chart, a corresponding moving average crossover could serve to

confirm the breakout. Or, if a stock breaks support, a corresponding low in the On

Balance Volume could serve to confirm the weakness.

1.11.1.3 Some investors and traders use indicators to predict the direction of future

prices.

1.11.2 Five important uses of indicators are to help in identifying:

1.11.2.1 Direction of a trend, ranging from short- to long-term

1.11.2.2 Strength of a trend

1.11.2.3 Support and resistance levels in a trend or in a trading range

1.11.2.4 Divergences that occur between indicators and price, suggesting a possible

future trend reversal

1.11.2.5 Trend reversal confirmations, also ranging from short- to long-term

1.11.3 There are basically four different types of technical indicators:

1.11.3.1. Trend indicators.- These indicators are used to indicate the direction of a

trend. These are very useful because the basic rule is that you should always trade

with a trend and not against it. Some examples of trend following indicators include

Parabolic SAR, MACD and Moving Averages.


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1.11.3.2. Momentum indicators.- Momentum or strength indicators are used to

indicate the speed or strength of a move in price and are best used to determine a

change in direction. They tend to be oscillating indicators showing overbought and

oversold positions. Examples include CCI, RSI and Stochastic.

1.11.3.3. Volatility indicators.- These indicators, as the name suggests, show a

change in volatility, which often leads to a change in price. Examples include ATR,

Bollinger Bands and Envelopes.

1.11.3.4. Volume indicators. Volume indicators are used to show the volume of

trading in a particular currency. These are useful to confirm the direction of a trend or

to signal a breakout. For example, if the pair trades in a narrow range and then breaks

out on high volume, then this is a very bullish signal. Examples of volume indicators

include Chaikin Money Flow, Demand Index and OBV.

For an introductory treatment of technical indicators we can say that there are

basically two types: moving averages and oscillators. Of the two, moving averages are

the more important indicators for long-term investors and for trend-following

purposes. Common oscillators include the relative strength index (RSI), momentum

and rate of change, stochastic, and MACD (moving average convergencedivergence)

and are of significant use for shorter-term trading, but are also of some benefit for

longer-term investors, just less frequently. When prices are confined to a trading

range, which is most often the result of the consolidation or correction to a prior up or

down trend, oscillators can be quite effective for identifying buy and sell entry points.

They become more accurate in trading range situations in providing an indication of

likely support or resistance, or the condition known as oversold or overbought.


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CHAPTER 2

(LITERATURE REVIEW & RESEARCH DESIGN)


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2.1 LITERATURE REVIEW

Literature review has under taken for analyze various literature and

research papers available in the related field. Further research can be undertaken

where sufficient study is not done in particular field. Various sources of information

have been used in this review include technical analysis books, financial journals,

articles and research papers.

2.2RESEARCH PAPERS

2.2.1. TECHNICAL ANALYSIS AND TYPICAL COGNITIVE

BIASES

Piotr Zielonka, Warsaw University SGGW and Leon Kozminski

Academy of Entrepreneurship and Management, Poland

2.2.1.1 Abstract

The paper describes a study carried out on a group of 24 Polish financial analysts. The

analysts responded to a questionnaire with 24 items (signals). They were asked to rate

the predictive value of different signals for the movements of stock prices. The signals

were of three types:

2.2.1.1.1 regular technical analysis signals, representing some common psychological

biases (gambler's fallacy, ignoring the principle of regression to mean, anchoring

effect and herd behavior)

2.2.1.1.2 technical-like signals created by the author of the research that imitated

technical signals and represented the same types of biases as real technical signals,


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2.2.1.1.3 other technical-like signals that did not represent any biases. It turned out

that the analysts tended to ascribe high predictive value to the questionnaire items

associated with psychological biases (either technical or technical-like signals).

At the same time, these items were rated very similarly by different analysts. On the

other hand, the technical-like signals not related to any biases were given very low

predictive values by the analysts. These results suggest that popularity of technical

analysis is associated with its relation to the typical cognitive biases of humans.

2.2.1.2 Methodology

The study was carried out in Warsaw in January-February 2002. The participants

were 24 financial analysts or dealers employed by banks and Polish capital market

institutions. The sample was not random. Each participant was administered a 24

item questionnaire. There were three groups of items within the questionnaire. Each

group consisted of 8 items. The first group consisted of regular technical analysis

signals representing four common psychological inclinations. Each inclination was

represented by two signals. Usually one from a pair of signals was a predictor of a

stock fall (-), whereas the other signal was a predictor of a stock rise (+).

The group consisted of technical-like signals, created by the author of the

questionnaire that did not represent any psychological inclinations.

- Drop of chemical companies' prices,

- Horizontal, typically sinusoidal WIG index movement,

- Rising WIG index creates longer and longer horizontal shelves,

- A fan formation support line moves upward,


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- Diminishing dynamics of price rise in textile branch,

- An alternate large and small daily trade volume,

- Second MACD derivative goes negative,

- WIG index creates horizontal small amplitude sinusoid curve.

The cover page of the questionnaire stated that the survey was designed to better

understand the opinions of experts on implementation of technical analysis. This

remark allowed the participants to feel more like experts whose opinion is needed for

some further research rather than merely the persons to be examined. Respondents

were assured of confidentiality.

2.2.1.3 Conclusion

The present research shows that many technical analysis signals represent common

psychological biases such as the gamblers fallacy, anchoring effect or herd behavior.

All real technical analysis signals were assigned a high predictive value by the

financial analysts who responded to the questionnaire. The technical signals created

by the author of the research either represented psychological biases or not. If they

did, they received high scores from respondents as good predictors the of stock

market behavior. If they did not, the respondents estimated them as bad predictors. In

addition, the respondents were in general agreement about their judgments. These

results confirm both hypotheses of this research: technical analysis signals represent

some common psychological biases and financial analysts are subject to these biases.


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2.2.2 TECHNICAL ANALYSIS IN THE FOREIGN EXCHANGE

MARKET: A CO-INTEGRATION- BASED APPROACH.

Nobert Fiess, University of Strathclyde and U.K. Ronald MacDonald, University

of strathclyde, U.K.

Most technical analysis studies are concerned with the profitability of technical

trading rules and almost all of them focus exclusively on trend following patterns. In

this paper they examine a different kind of technical indicator which suggests a

structural relationship between High, Low, and Close prices of daily exchange rates.

Since, for a given exchange rate, it can be shown that these prices have different time

series properties, it is possible to explore the structural relationships between them

using multivariate co-integration methods. This methodology facilitates the

construction of dynamic structural econometric models, which are used to derive

dynamic out of sample forecasts over different time horizons. Compared to standard

benchmarks, it turns out that these models have extremely good forecasting

properties, even when allowance has been made for transactions costs and risk

premium

2.2.2.1 Methods and Results

2.2.2.1.1 Structural Econometric Modeling

Their modeling strategy follows recent developments in the econometric literature, in

particular the work of Clements and Mizon (1991), Hendry and Mizon (1993) and

Johansen (1988), and they label it structural econometric modeling.6 Via a series of

testable restrictions and reductions, this modeling strategy transforms an initial vector

autoregressive model (VAR) in levels into a set of linear structural equations that

incorporate both long and short-run dynamics. Starting from an unrestricted VAR, the


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hypothesis of co integration is formulated as a hypothesis of reduced rank of the long

run impact matrix. The VAR is generated by the vector, which defines the potential

endogenous variables of the model.

2.2.2.1.2 Co integration and the Stochastics

. The Stochastics establish a structural relationship between the Close of today and the

Maximum and Minimum price of a moving period, measured as the highest High and

the lowest Low. Specifying a VAR with the data vector testing for co-integration

between the three variables should reveal if, when using the Stochastics, an investor is

intuitively exploiting Granger causality among the three series. Each VAR included a

constant in the co-integration space and 15 lags of each of the variables, which was

sufficient to produce random errors

2.2.2.2 Conclusion

The forecasting models were estimated over the first 2500 data observations, thus

sparing roughly 10% of the total sample for forecasting. Since the classic paper of

Meese and Rogoff (1983), the crucial factor in determining the worth of an exchange

rate model is how well it forecasts in an out-of-sample context relative to a random

walk, using the metric of the root mean square error (RMSE) criterion. In table 5,

their statistics are calculated as the ratio of the RMSE of the forecasting model over

the RMSE of a drift less random walk; a value.


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2.2.3 THE USE OF FUNDAMENTAL AND TECHNICAL

ANALYSIS BY FOREIGN EXCHANGE DEALERS: HONG KONG

EVIDENCE.

David Mole, Department of economics and finance, City university of Hong

Kong.

2.2.3.1 Abstract

This article reports the results of a questionnaire survey conducted in February 1995

on the use by foreign exchange dealers in Hong Kong of fundamental and technical

analyses to form the forecasts of exchange rate movements. Findings of this study

reveal that > 85% of respondents rely on both fundamental and technical analysis for

predicting future price at different time horizons. At shorter horizons, there exists a

skew towards reliance on technical analysis as opposed to fundamental analysis, but

the skew becomes steadily reversed as the length of horizon considered is extended.

2.2.3.2 Methodology

To prepare the survey, they concluded dealers at the Hong Kong monetary Authority

and most of the major banks. After consultation, they designed a questionnaire

investigating the following.

2.2.3.2.1. The usefulness of fundamental and technical analysis is forecasting trends

and turning points.

2.2.3.2.2. Dealers give personal importance to fundamental and technical analyses

over seven forecasting horizons.


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2.2.3.2.3. Dealers views of the complimentarily of fundamental and technical analyses

in exchange rate forecasting.

2.2.3.2.4. The usefulness of central bank intervention in influencing exchange rates

over the horizons of intraday, intra-month and month.

The Hong Kong Forex Association with its membership list as of September 1994

provided them. A total of 153 fully completed questionnaires were returned at a

response rate of 19%. Most respondents firms are active participants in the market.

2.2.3.3 Conclusion

At all the time horizons, a very high proportion of respondents place some weight on

both fundamental and technical analysis when forming views. Dealers perceive value

in using both fundamental and technical analysis to predict both trends. Technical

analysis is considered only slightly more useful than fundamental analysis.

2.3 RESEARCH DESIGN

2.3.1 Statement of Problem

The above study is undertaken to compare the selected technical

analysis tools/indicators available for forecasting. The study tries to make a

comparative analysis of the various tools and techniques used in technical analysis.

This study is aims at exploration of the topic TECHNICAL ANALYSISA TOOL

FOR TRADING DECISIONS.

2.3.2 Objectives of the Study

2.3.2.1 To find out the relevance of technical analysis in market analysis that helps in

profit making in terms of returns.


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2.3.2.2 To find out the relevance of the tools used in technical analysis in the

assessment of the market.

2.3.2.3 The study tries to capture the contradicting views of different tools used in

technical analysis.

2.3.2.4 To find out the accuracy of technical analysis in individual stock price

prediction.

2.3.2.5 To introduce a structured approach to market analysis that will help to perform

a quick top to bottom assessment of the market, to decide which actions are

appropriate.

2.3.3 Scope of the Study

Technical analysis of market data has long been a pervasive activity in

both security and future markets. Technical analyst believes that price and volume

data provide indication of future price movements, and that by examining these data,

information may be extracted on the fundamentals driving returns. If markets are

efficient in the sense that the current price impounds all information then such activity

is clearly pointless. But if the process by which prices adjust to information is not

immediate, then the market statistics may impound information that is not yet

incorporated in to the current market price.

Technical analysis is very useful because it provides tools that allow

investors to identify the signs that new information is being priced into a stock before

news is released. Stocks that trade abnormally often do so because of significant new

information, both positive and negative. In this way, technical analysis helps to reveal

fundamental changes in the company before the broader market is aware of it.


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In this dissertation, the market data is investigated to find out the future stock

price movements. The charts will prove to be valuable to the traders. This study is

useful for those who are risk averse and those who wants to protect themselves from

the risk arising from the unexpected market movements and also this study focuses on

the effectiveness of the hedged portfolio and also tests that effectiveness.

2.2.4 Resource Design

2.2.4.1 Data

The data collected for the research purpose are secondary data. Index prices

were collected through National Stock Exchange website and through Capitaline

website. The data employed in this study comprises of one year observations on the

NIFTY stock index Closing price. Daily data are preferred in this study. The choice of

daily closing price is realistic and helpful to calculate and testing the results in

technical analysis.

The secondary sources of data:

2.2.4.1.1 Technical analysis of Financial Markets by John J Murphy.

2.2.4.1.2 Essential Technical analysis by Leigh Stevens.

2.2.4.1.3 Financial journals, dailies like The analyst, Capital market, Dalal Street,

Economic Times, and Business Line are also used.

2.2.4.2 Sample Size

One year sensitivity index i.e. from 1st February, 2011 to 31st January, 2012 has been

taken for testing the relevance of technical analysis.


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2.2.4.3 Statistical Tools Used

2.2.4.3.1 Moving Averages: Moving averages are one of the oldest and most popular

technical analysis tools. A Moving Average is an indicator that shows the average

value of a security's price over a period of time. When calculating a moving average,

a mathematical analysis of the security's average value over a predetermined time

period is made. As the security's price changes, its average price moves up or down.

Parameters for Calculation:

In calculating the various types of moving averages, one must first decide the prices

on which the moving averages would be based. Now there are four basic types of

prices maintained by analysts, the open, high, low and the closing prices. Of these, the

closing prices are generally used to calculate the various types of moving averages.

This does not mean that one cannot calculate the moving averages on either high, low

or the open prices or the average of these prices or for that matter any other

combination of these prices. But as the closing prices are the most popular, it shall be

employed in calculating the averages. Again moving averages can be calculated with

the help of the daily or weekly or monthly closing prices.

Calculation:

A simple, or arithmetic, moving average is calculated by adding the closing price of

the security for a number of time periods (e.g., 12 days) and then dividing this total by

the number of time periods. The result is the average price of the security over the

time period.

For example, to calculate a 21-day moving average of IBM: First, we would add up

IBM's closing prices for the preceding 21 days. Next, we would divide that sum by


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21; this would give us the average price of IBM over the preceding 21 days. We

would plot this average price on the chart. The following day (tomorrow) we would

do the same calculations: add up the previous 21 days' closing prices, divide by 21,

and plot the resulting figure on the chart.

2.2.4.3.2 Rate of Change: The Price Rate-Of-Change (R.O.C.) indicator (percent

method) is calculated by dividing the price change over the last x-periods by the

closing price of the security x-periods ago. The result is the percentage that the

security's price has changed in the last x-periods.

The formula can be represented as follows:

Rate of Change = [(Closing Price- Opening Price)/Opening price] * 100

A long recognized phenomenon of security prices is the fact that prices tend to surge

ahead and retract in a cyclical wave-like motion. The Price Rate-Of-Change indicator

illustrates this wave-like motion of a security's price in an oscillator format. As the

security's price increases, its R.O.C. will rise; conversely, as its price falls, its R.O.C.

will fall. The faster prices rise or fall, the faster the R.O.C. will rise or fall.

Calculation:

There are two broad methods of calculating this oscillator:

2.2.4.3.2.1 Take the current closing price and express this price as a percentage of the

price twelve days/weeks in the past. Suppose the price on any day is Rs.12 and the

price twelve days ago was 10, the RoC will be obtained by using the equation

= (12/10) * 100 = 120%


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2.2.4.3.2.2 In this method, the percentage variation between the current price and the

price twelve days in the past is calculated. Thus, the 12-day RoC will be

= [(12/10) * 100]100 = 20%

Here it may be noted that one will arrive at positive and negative values for the RoC.

2.2.4.3.3 Relative Strength Index The Relative Strength Index (RSI) is a popular

oscillator used by commodity traders. It was first introduced by J. Welles Wilder in an

article Commodities (now known as Futures) magazine in June, 1978. RSI does not

compare the relative strength of two securities, but rather the internal strength of a

single security.

Calculation:

A simple RSI is calculated by finding the difference between the current d ays closing

price and the previous days closing price. The difference would thus determine

whether it was a gain or a loss. Then the total gains and losses are totaled up. Later

average gain, average loss, relative strength and relative strength index are calculated

as per the below mentioned formula:

Average gain = (Total gains / n)

Average loss = (Total loss / n) where, N = number of RSI periods

Relative Strength (RS) = Average gain / Average loss

RSI = {100[100 / (1+RS)]}

The RSI can be calculated for any number of days depending on the fancy of the

technical analyst and the time frame of trading. The most commonly used time period

is the 14-day RSI. In general, it can be stated that the greater the time period, the


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lower would be the volume of whipsaws. On the other hand, when the period is

shorter, signals are generated earlier, though with a high degree of fallibility.

2.2.4.3.4 MACD The moving average convergence and divergence (MACD),

measures the convergence and divergence between two exponential moving averages.

Or put simply, it is the difference between two moving averages of varying periods

and is calculated with the help of the closing price data. Of the two, one is the short-

term moving average and the other is the longer-term moving average. The MACD

would represent the absolute difference between the short-term moving average and

the long-term moving average.

Calculation:

The MACD is plotted against a centerline. The centerline is the point at which the two

moving averages are equal. Along with the MACD and the centerline, an exponential

moving average of the MACD itself is plotted on the chart. The idea behind this

momentum indicator is to measure short-term momentum compared to longer term

momentum to help signal the current direction of momentum. There are two popular

combinations of average, the first one is the 12-day and 26-day exponential averages

and the second one being the 12-day and 48-day exponential averages. Now, another

average is generally superimposed over this graph. For the 12-day and 26-day

combination, the use of 9-day exponential average is quite popular and for the 12-day

and 48-day combination, use of simple 10-day average is popular. During the

calculation, the following formula is used:

Exponential moving average

= (current priceprevious EMA) * factor + previous EMA


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CHAPTER-3

(INDUSTRY PROFILE)


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3.1HINDALCO INDUSTRIES LTD.

An industry leader in aluminium and copper, Hindalco Industries

Limited, the metals Flagship Company of the Aditya Birla Group is the world's

largest aluminium rolling company and one of the biggest producers of primary

aluminium in Asia. Its copper smelter is the worlds largest custom smelter at a single

location.

Established in 1958, we commissioned our aluminium facility at

Renukoot in eastern Uttar Pradesh, India in 1962. Later acquisitions and mergers,

with Indal, Birla Copper and the Nifty and Mt. Gordon copper mines in Australia,

strengthened our position in value-added alumina, aluminium and copper products.

The acquisition of Novelis Inc. in 2007 positioned the company

among the top five aluminium majors worldwide and the largest vertically integrated

aluminium company in India. Today they are a metals powerhouse with high-end

rolling capabilities and a global footprint in 13 countries. Their consolidated turnover

of USD 15.85 billion (Rs. 72,078 crore) places us in the Fortune 500 league.

Hindalco is one of the leading producers of aluminium and copper.

Our aluminium units across the globe encompass the entire gamut of operations, from

bauxite mining, alumina refining and aluminium smelting to downstream rolling,

extrusions, foils, along with captive power plants and coal mines.

Our copper unit, Birla Copper, produces copper cathodes, continuous

cast copper rods and other by-products, such as gold, silver and DAP fertilisers.

Our units are ISO 9001:2000, ISO 14001:2004 and OHSAS 18001

certified. Several units have gone a step further with an integrated management


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system (IMS), combining ISO 9001, ISO 14001 and OHSAS 18001 into one business

excellence model. We have been accorded the Star Trading House status in India.

Hindalco's aluminium metal is accepted for delivery under the High Grade

Aluminium Contract on the London Metal Exchange (LME). Our copper quality

standards are also internationally recognised and registered on the LME with Grade A

accreditation.

Hindalco's major products include standard and speciality grade

aluminas and hydrates, aluminium ingots, billets, wire rods, flat rolled products,

extrusions and foil.

The integrated facility at Renukoot houses an alumina refinery and an

aluminium smelter, along with facilities for the production of semi-fabricated

products, namely, redraw rods, flat rolled products and extrusions. The plant is backed

by a co-generation power unit and a 742 MW captive power plant at Renusagar to

ensure the continuous supply of power for smelter and other operations.

A strong presence across the value chain and synergies between

operations has given us a dominant share in the value-added products market. As a

step towards expanding the market for value-added products and services, we have

launched various brands in recent years Ever last roofing sheets, Fresh-wrap

kitchen foil and Fresh-pack semi-rigid containers.

Birla Copper, Hindalcos copper unit, is located at Dahej in Gujarat,

India. The unit has the unique distinction of being the largest single-location copper

smelter in the world. The smelter uses state-of-the-art technology and has a capacity

of 5, 00,000 t.p.a.


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Birla Copper also produces precious metals, fertilizers and sulphuric and

phosphoric acid. The unit has captive power plants for continuous power generation

and a captive jetty to facilitate logistics and transportation.

Birla Copper upholds its longstanding reputation for quality copper

cathodes and continuous cast copper rods by assuring its management processes meet

the highest standards. It has acquired certifications such as ISO-9001:2000 (Quality

Management Systems), ISO-14001:2004 (Environmental Management System) and

OHSAS-18001:2007 (Occupational Health and Safety Management Systems).

Hindalco acquired two Australian copper mines, Nifty and Mt. Gordon, in

2003. The Birla Nifty copper mine consists of an underground mine, heap leach pads

and a solvent extraction and electro winning (SXEW) processing plant, which

produces copper cathode.

The Mt. Gordon copper operation consists of an underground mine and a

copper concentrate plant. Until recently, the operation produced copper cathode

through the ferric leach process. In 2004, a copper concentrator was commissioned to

provide concentrate for use at Hindalco's operations in Dahej. Both Nifty and Mt.

Gordon have a long-term life of mine off-take agreement with Hindalco for supply of

copper concentrate to the copper smelter at Dahej.

Our well-crafted growth and integration hinges on the three

cornerstones of cost competitiveness, quality and global reach. We are also committed

to the triple bottom line accountability of economic, environment and social factors.

Care for the community around our operating units is best exemplified by our deep-

rooted social commitment.


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3.2 WIPRO LTD

Wipro Limited (formerly Western India Products Limited (Amalner)) (BSE: 507685,

NSE: WIPRO, NYSE: WIT) is an Indian global IT services and consulting company

headquartered in Bangalore, India. As of 2012, Wipro is the second largest IT services

company by turnover in India, employing about 120,000 people worldwide as of

December 2011. It provides outsourced research and development, infrastructure

outsourcing, business process outsourcing (BPO) and business consulting services.

The company operates in three segments: IT Services, IT Products, Consumer Care

and Lighting. It is 9th most valuable brand in India according to an annual survey

conducted by Brand Finance and The Economic Times in 2010.

The company was established in 1945 by Mohamed Hasham Premji as Western India

Products Limited, later abbreviated to Wipro. It was initially set up as a vegetable oil

manufacturer in Amalner, Maharashtra, producing sunflower Vanaspati oil and soaps.

The company logo still contains a sunflower to reflect their original business.

In 1966, Azim Premji, aged 21 at the time, took over as chairman of the company, and

started the changes that over time transformed Wipro into one of the largest IT

outsourcing services provider of the world. Along with a small number of

shareholders, Azim Premji is a major shareholder in Wipro. During the 1970s and

1980s, the company shifted its focus and began to look into business opportunities in

the IT and computing industry, which was at nascent stages in India at that time.

Wipro marketed the first indigenous homemade PC from India in 1985.

By 2000, Wipro Technologies emerged as the largest publicly listed software exporter

in India and the first software services provider to be assessed at SEI Level 5 in the


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world. Wipro won the Golden Peacock Innovative Service Award[8] for effective

service delivery using state of art technology in 2001.

Wipro was awarded SVG1, the highest rating in Stakeholder Value Creation and

Governance Practices by ICRA, a premier credit rating agency in India and an

associate of Moodys Investor Services of USA.

Wipro was awarded the India Manufacturing Excellence Award for its factory in

Pondicherry in the large enterprises category by Frost & Sullivan.Wipro was awarded

the ASTD BEST Awards for 2005 by the American Society of Training and

Development.

Wipro's Global Command Centre won the Marico Foundation and Business World's

Innovation for India Award in 2006. The conglomerate was rated as the No.1

Network Integrator and No.1 Network Security Services Provider by Voice & Data

Magazine.

Wipro was ranked 37 in The Brand Trust Report among the most trusted brands in

India

3.3INFOSYS TECHNOLOGIES

Infosys Limited formally Infosys Technologies (BSE: 500209, NSE: INFY,

NASDAQ: INFY) is an Indian global technology services company headquartered in

Bangalore, India. Infosys is ranked #27 in the list of top companies of India in

Fortune India 500 list in 2011. It has offices in 29 countries and development centers

in India, US, China, Australia, UK, Canada, Japan and many other countries. Infosys

had 1,45,088 employees of 85 nationalities as on December 31, 2011. Infosys


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provides business consulting, technology, engineering and outsourcing services to

help clients in over 30 countries. The company is under a debt of 7 billion dollars.

Infosys was founded in 1981 by N. R. Narayana Murthy, Nandan Nilekani, N. S.

Raghavan, S. Gopalakrishnan, S. D. Shibulal, K. Dinesh and Ashok Arora. It moved

to Bangalore in 1983 and got its first foreign client, Data Basics Corporation from the

US, in 1987. In 1992 it opened its first overseas sales office in Boston, US. This was

followed by offices in Milton Keynes (1996), Toronto (1997), France and Hong Kong

(2000), UAE and Argentina (2001), Netherlands, Singapore and Sweden (2002) and

the list goes on until the present day at which point it has 64 offices and 68

development centers in India and abroad.

Infosys has revenues of US$ 6.825 billion (LTM Q3-FY12). Infosys delivers IT-

enabled business solutions to enable Global 2000 companies to build their enterprises

of tomorrow. Infosys ranked among the most innovative companies in a Forbes

survey, leading technology companies in a report by The Boston Consulting Group

and top ten green companies in Newsweek's Green Rankings. Infosys was voted

India's most admired company in The Wall Street Journal Asia 200 every year since

2000. The corporate governance practices were recognized by The Asset Platinum

award and the IR Global Rankings.

In 2001, it was rated by Business Today. Infosys was rated best employer to work for

in 2000, 2001, and 2002 by Hewitt Associates. In 2007, Infosys received over 1.3

million applications and hired fewer than 3% of applicants.

Infosys won the Global MAKE (Most Admired Knowledge Enterprises) award for the

years 2003, 2004 and 2005, and is inducted into the Global Hall of Fame for the same.


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Infosys was also ranked as the 15th most trusted brand in India by The Brand Trust

Report in 2011.

3.4RELIANCE INDUSTRIES LTD.

Reliance Industries Limited (RIL) (BSE: 500325, NSE: RELIANCE, LSE: RIGD) is

an Indian conglomerate company headquartered in Mumbai, India. The company

operates through three business segments: petrochemicals, refining, and oil and gas,

other segment of the company includes textile, retail business, special economic zone

(SEZ) development and telecom/broadband business. RIL is the largest publicly

traded company in India by market capitalization and second-largest public

corporation in India when ranked by revenue. The company is listed on Fortune

Global 500 and Forbes Global 2000.

In September 2008 Reliance Industries was the only Indian firm featured in the

Forbes's list of "world's 100 most respected companies". In 2010 it stood at 13th

position in the Platts Top 250 Global Energy Company Rankings. Though the

company's petrochemicals, refining, and oil and gas-related operations form the core

of its business, other segments of the company include textiles, retail business,

telecommunications, and special economic zone (SEZ) development. Reliance Retail

has entered into the fresh foods market as Reliance Fresh.

3.4.1 Major subsidiaries and associates

Reliance Life Sciences participates in medical, plant and industrial biotechnology

opportunities. Specifically, these relate to biopharmaceuticals, pharmaceuticals,

clinical research services, regenerative medicine, molecular medicine, novel

therapeutics, biofuels, plant biotechnology, and industrial biotechnology.


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Reliance Institute of Life Sciences (Rils), established by Dhirubhai Ambani

Foundation, is an institution of higher education in various fields of life sciences and

related technologies.

Reliance Logistics (P) Limited is a single-window solutions provider for

transportation, distribution, warehousing, logistics, and supply chain needs, supported

by in-house state of the art telematics and telemetry solutions.

Reliance Clinical Research Services (RCRS), a contract research organisation

(CRO) and wholly owned subsidiary of Reliance Life Sciences, has been set up to

provide clinical research services to pharmaceutical, biotechnology, and medical

device companies.

Reliance Solar, the solar energy initiative of Reliance, aims to bring solar energy

systems and solutions primarily to remote and rural areas and bring about a

transformation in the quality of life.

Relicord is a stem-cell banking service controlled by Reliance Industries.

Infotel Broadband is a broadband service provider which gained 4G licensees for

operating across India, now it is wholly owned by RIL for 4,800 crore (US$1.06

billion).

3.4.2 Reliance Industrial Infrastructure Limited

Reliance Industrial Infrastructure Limited (RIIL) was incorporated in September 1988

as Chembur Patalganga Pipelines Limited, with the main objective being to build and

operate cross-country pipelines for transporting petroleum products. The company's

name was subsequently changed to CPPL Limited in September 1992, and thereafter


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to its present name, Reliance Industrial Infrastructure Limited, in March 1994. It has

been promoted by Mr. Satyapal Jain and his associates. The company set up a 200-

millimetre diameter twin pipeline system that connects the Bharat Petroleum refinery

at Mahul, Maharashtra, to Reliance's petrochemical complex at Patalaganga,

Maharashtra. The pipeline carries petroleum products including naptha and kerosene.

It has commissioned facilities like the supervisory control and data acquisition system

and the cathodic protection system, a jackwell at River Tapi, and a raw water pipeline

system at Hazira. The infrastructure company constructed a 70,000 kilolitre

petrochemical product storage and distribution terminal at the Jawaharlal Nehru Port

Trust (JNPT) Area in Maharashtra. RIIL is mainly engaged in the business of setting

up and operating industrial infrastructure. The company is also engaged in related

activities involving leasing and providing services connected with computer software

and data processing.

Reliance retail Reliance Retail is the retail business wing of the Reliance business.

Many brands like Reliance Fresh, Reliance Footprint, Reliance Time Out, Reliance

Digital Store, Reliance Wellness, Reliance Trendz, Reliance Autozone, Reliance

Super, Reliance Mart, Reliance iStore, Reliance Home Kitchens, Reliance Market

(Cash n Carry) and Reliance Jewel come under the Reliance Retail brand.

3.5 TATA STEEL

Tata Steel Limited (BSE: 500470) (formerly TISCO and Tata Iron and Steel

Company Limited) is a multinational steel company headquartered in Mumbai, India

and subsidiary of Tata Group. It is the tenth-largest steel producing company in the

world, with an annual crude steel capacity of 23.5 million tonnes, and the largest

private-sector steel company in India measured by domestic production. Tata Steel is


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also India's second largest and second-most profitable private-sector company, with

consolidated revenues of $26 billion and net profit of over $1.9 billion in the year

ended March 31, 2011. Tata Steel is the eighth most-valuable Indian brand according

to an annual survey conducted by Brand Finance and The Economic Times in 2010.

It is currently ranked 410th in the Fortune Global 500.

Tata Steel's largest plant is located in Jamshedpur, Jharkhand, with its recent

acquisitions, the company has become a multinational with operations in various

countries. The registered office of Tata Steel is in Mumbai. The company was also

recognized as the world's best steel producer by World Steel Dynamics in 2005. The

company is listed on Bombay Stock Exchange and National Stock Exchange of India,

and employs about 80,000 people. In August 2007 Tata Steel won the bid to acquire

the UK-based steel maker Corus in what was, to date, the largest international

acquisition by an Indian company. It made the Tata Group the world's fifth largest

steel maker, and catapulted them to the global league.

TISCO was established by Jamshedji Tata in year 1907.In year 1939, it had largest

steel plant in the British empire. A modernization and expansion program was

launched in year 1951. Later, the program was upgraded to 2 MTPA project. In 1990,

it started expansion plan and established its subsidiary Tata Inc. in New York. The

company changed its name TISCO to Tata Steel in year 2005.

The company is facing increasing criticism that the drive for growth and profits is

completely overshadowing its once famed philanthropy, and causing lasting social

and environmental damage at various locations. In response, Tata cites its programs

for environment and resource conservation, including reduction in greenhouse

emission, raw materials and water consumption. The company has increased waste re-


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use and re-cycling, and reclaims land at its captive mines and collieries through

forestation. Tata Steel's chief, environment and occupational health, says, "Our capital

investment in pollution-abatement solutions was in the vicinity of Rs 400 crore in

2003-04.

3.6 BAJAJ AUTO LTD.

Bajaj Auto Limited (BSE: 532977, NSE: BAJAJ-AUTO) is an Indian motorized

vehicle-producing company. Bajaj Auto is a part of Bajaj Group. Its founded by

Jamnalal Bajaj at Rajasthan in the 1930s. It is based in Pune, Maharashtra, with plants

in Chakan (Pune), Waluj (near Aurangabad) and Pantnagar in Uttaranchal. The oldest

plant at Akurdi (Pune) now houses the R&D centre Ahead. Bajaj Auto makes and

exports automobiles, scooters, motorcycles and the auto rickshaw.

The Forbes Global 2000 list for the year 2005 ranked Bajaj Auto at 1,946. It features

at 1639 in forbes 2011 list.

Over the last decade, the company has successfully changed its image from a scooter

manufacturer to a two-wheeler manufacturer. Its product range encompasses

scooterettes, scooters and motorcycles. Its real growth in numbers has come in the last

four years after successful introduction of a few models in the motorcycle segment.

The company is headed by Rahul Bajaj who is worth more than US$1.5 billion.

Bajaj Auto came into existence on 29 November 1945 as M/s Bachraj Trading

Corporation Private Limited. It started off by selling imported two- and three-

wheelers in India. In 1959, it obtained license from the Government of India to

manufacture two- and three-wheelers and it went public in 1960. In 1970, it rolled out

its 100,000th vehicle. In 1977, it managed to produce and sell 100,000 vehicles in a


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single financial year. In 1985, it started producing at Waluj near Aurangabad. In 1986,

it managed to produce and sell 500,000 vehicles in a single financial year. In 1995, it

rolled out its ten millionth vehicle and produced and sold one million vehicles in a

year.

The demerger of Bajaj Auto Ltd into three separate corporate entitiesBajaj Finserv

Ltd (BFL), Bajaj Auto Ltd (BAL), and Bajaj Holdings and Investment Ltd (BHIL)

was completed with the shares listing on 26 May 2008.

In November 2007, Bajaj Auto acquired 14.5% stake in KTM Power Sports AG

(holding company of KTM Sportmotorcycles AG). The two companies have signed a

cooperation deal, by which KTM will provide the know-how for joint development of

the water-cooled four-stroke 125 and 250 cc engines, and Bajaj will take over the

distribution of KTM products in India and some other Southeast Asian nations. Bajaj

said it is open to taking a majority stake in KTM and is also looking at other takeover

opportunities. On 8 January 2008, Managing Director Rajiv Bajaj confirmed the

collaboration and announced his intention to gradually increase Bajaj's stake in KTM

to 25%.

3.7 BHARAT PETROLEUM CORPORATION LTD.

Bharat Petroleum Corporation Limited (BPCL) (BSE: 500547, NSE: BPCL) is a

state-controlled oil and gas company headquartered in Mumbai, India. In 2011,

Fortune Global 500 ranked the company of 272.

In 1860s during vast industrial development, an important player in the South Asian

market was the Burma oil company ltd Though incorporated in Scotland in 1886, the

company grew out of the enterprises of the Rangoon Oil Company, which had been


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formed in 1871 to refine crude oil produced from primitive hand dug wells in Upper

Burma.

In 1928, Asiatic Petroleum Company (India) started cooperation with Burma oil

company. This alliance led to the formation of Burmah-Shell Oil Storage and

Distributing Company of India Limited. Burmah Shell began its operations with

import and marketing of Kerosene.

On 24 January 1976, the Burmah Shell was taken over by the Government of India to

form Bharat Refineries Limited. On 1 August 1977, it was renamed Bharat Petroleum

Corporation Limited. It was also the first refinery to process newly found indigenous

crude Bombay High.Bharat Petroleum owns refineries at Mumbai, Maharashtra and

Kochi, Kerala (Kochi Refineries) with a capacity of 12and 15.5 million metric tonnes

per year.

3.8 BHARAT HEAVY ELECTRICALS LIMITED

Bharat Heavy Electricals Limited (BHEL) (BSE: 500103, NSE: BHEL) is one of the

oldest and largest state-owned engineering and manufacturing enterprise in India in

the energy-related and infrastructure sector which includes Power, Railways,

Transmission and Distribution, Oil and Gas sectors and many more. It is the 12th

largest power equipment manufacturer in the world. In the year 2011, It ranked ninth

most innovative company in the world by US business magazine Forbes. BHEL is the

only Indian Engineering company on the list, which contain online retail firm

Amazon at the second position with Apple and Google at fifth and seventh positions,

respectively. It is also placed at 4th place in Forbes Asia's Fabulous 50 List of 2010.

BHEL was established more than 50 years ago, ushering in the indigenous Heavy


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Electrical Equipment industry in India. The company has been earning profits

continuously since 1971-72 and paying dividends since 1976-77. 74% of the total

power generated in India is produced by equipment manufactured by BHEL.

It is one of India's nine largest Public Sector Undertakings or PSUs, known as the

Navratnas or 'the nine jewels'.

BHEL Bhopal (Madhya Pradesh )

BHEL Ranipur, Haridwar (Uttarakhand)

BHEL Ramachandrapuram, Hyderabad (Andhra Pradesh)

Transformer Plant, BHEL Jhansi (Uttar Pradesh)

High Pressure Boiler Plant and Seamless Steel Tube Plant, Tiruchirapalli(Tamil

Nadu)

Boiler Auxiliaries Plant, Ranipet, vellore (Tamil Nadu)

Electronics Division and Electro Porcelain Division, Bangalore (Karnataka)

Jagdishpur (Uttar Pradesh)

Rudrapur (Uttrakhand)

Industrial Valves Plant, Goindwal (Punjab)

Bharat Heavy Plates and Vessels Limited (Vizag)

Besides these manufacturing units there are four power sectors which undertake EPC

contract from various customers. The Research and Development arm of BHEL is


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situated in Hyderabad and two repair shops are at HERP (Heavy Equipment Repair

Plant), Varanasi[11] and EMRP(Electric machines repair plant) Mumbai.

BHEL cannot be considered as a company. It is a part of Indian Government and if

Government is not stable, BHEL will go towards degradation.

3.9 CANARA BANK

Canara Bank (BSE: 532483, NSE: CANBK) is an Indian state-owned financial

services company headquartered in Bangalore, Karnataka. It was established in 1906,

making it one of the oldest banks in the country. As on 2009 November, the bank had

a network of 3057 branches, 4000atms spread across India. The bank also has offices

abroad in London, Hong Kong, Moscow, Shanghai, Doha, and Dubai.Widely known

for customer centricity, Canara Bank was founded by Shri Ammembal Subba Rao

Pai, a great visionary and philanthropist, in July 1906, at Mangalore, then a small port

in Karnataka. The Bank has gone through the various phases of its growth trajectory

over hundred years of its existence. Growth of Canara Bank was phenomenal,

especially after nationalization in the year 1969, attaining the status of a national level

player in terms of geographical reach and clientele segments. Eighties was

characterized by business diversification for the Bank. In June 2006, the Bank

completed a century of operation in the Indian banking industry. The eventful journey

of the Bank has been characterized by several memorable milestones. Today, Canara

Bank occupies a premier position in the comity of Indian banks. With an unbroken

record of profits since it inception.


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Ammembal Subba Rao Pai, a philanthropist, established the Canara Hindu Permanent

Fund in Mangalore, India, on 1 July 1906.[2] The bank changed its name to Canara

Bank Limited in 1910 when it incorporated.

In 1958, the Reserve Bank of India ordered Canara Bank to acquire G.

Raghumathmul Bank, in Hyderabad. This bank had been established in 1870, and had

converted to a limited company in 1925. At the time of the acquisition G.

Raghumathmul Bank had five branches.[3]

The Government of India nationalised Canara Bank, along with 13 other major

commercial banks of India, on 19 July 1969.

In 1976, Canara Bank inaugurated its 1000th branch.

In 1983, Canara Bank opened its first overseas office, a branch in London. In 1985,

Canara Bank acquired Lakshmi Commercial Bank in a rescue.

In 1985, Canara Bank established a subsidiary in Hong Kong, Indo Hong Kong

International Finance.

In 1996Canara Bank became the first Indian Bank to get ISO certification for Total

Branch Banking for its Seshadripuram branch in Bangalore. Canara Bank has now

stopped opting for ISO certification of Branches.

In 2008-9, Canara Bank opened its third foreign operation, this one a branch in

Shanghai.


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3.10 CIPLA LIMITED

Cipla Limited (BSE: 500087, NSE: CIPLA) is a prominent Indian pharmaceutical

company, best-known outside its home country for manufacturing low-cost anti-AIDS

drugs for HIV-positive patients in developing countries. Founded by nationalist

Indian scientist Khwaja Abdul Hamied as The Chemical, Industrial & Pharmaceutical

Laboratories in 1935, Cipla makes drugs to treat cardiovascular disease, arthritis,

diabetes, weight control, depression and many other health conditions, and its

products are distributed in more than 180 countries worldwide.

Cipla offers services like consulting, commissioning, engineering, project appraisal,

quality control, know-how transfer, support, and plant supply.

Apart from its presence in the Indian market, Cipla also has an export market and

regularly exports to more than 185 countries in all corners of the world.

Cipla is also highly regarded for technological innovation and manufacturing

processes, and has been approved by numerous international regulatory bodies such

as:

Food and Drug Administration (FDA), USA

Medicines and Healthcare Products Regulatory Agency (MHRA), UK

Therapeutic Goods Administration (TGA), Australia

Medicines Control Council (MCC), South Africa

Orszgos Gygyszerszeti Intzet = National Institute of Pharmacy (NIP), Hungary

Pharmaceutical Inspection Convention (PIC), Germany


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World Health Organisation (WHO)

Health Canada, Canada

SUKL = State Institute for the Control of Drugs, Slovak Republic

Agncia Nacional de Vigilncia Sanitria = National Health Surveillance Agency

Brazil (ANVISA), Brazil.

3.11 COAL INDIA LIMITED

Coal India Limited (CIL) (BSE: 533278, NSE: COALINDIA) is an Indian state-

controlled coal mining company headquartered in Kolkata, West Bengal, India and

the world's largest coal miner with revenue exceeding 60,245 Crore (FY2010-11). It

was formerly owned entirely by the Union Government of India, under the

administrative control of the Ministry of Coal. It is involved in coal mining and

production industry. In April 2011, CIL was conferred the Maharatna status by the

Union Government of India and ranked as one of India's most valuable company by

market value.

In 2010, CIL's initial public offering (IPO) got subscribed 15.28 times, collecting a

record over Rs 2,40,000 crore (Rs 2,400 billion)the highest IPO subscription so far.

On the first day of its listing on the Sensex, its stock closed 40% higher than IPO

price. It is India's largest ever public offer from Coal India Ltd. to raise up to 15,000

crore (US$2.99 billion). It is currently 90% owned by the Government of India with

the remaining 10% owned by the public.

Coal India Ltd (CIL), will extract coal from 18 abandoned underground mines owned

by three of its subsidiaries in partnership with private players. Underground mining


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would be revived in 6 abandoned mines of Eastern Coalfields, 8 mines of Bharat

Coking Coal, and 4 mines of Central Coalfields. These 18 mines have an approximate

reserve of 1.647 billion tonnes of coal.

CIL contributes around 85% of coal production in India. It is the largest company in

the world in terms of coal production. It employs nearly 397,000 person and is the

largest corporate employer in the country. It is one of the largest companies in the

country, with turnover being around Rs. 386.31 billion in 2007-08. It is one of the

largest tax payer (Corporate Tax 35.75 billion (US$713.21 million)) in 2007-08 and

has paid Dividend of 17.054 billion (US$340.23 million) to the Govt. of India in

2007-08.

3.12 DABUR INDIA LIMITED

Dabur (Dabur India Ltd.) (Devanagari: ) derived from Daktar Burman) is India's

largest Ayurvedic medicine manufacturer. Dabur's Ayurvedic Specialities Division

has over 260 medicines for treating a range of ailments and body conditions-from

common cold to chronic paralysis.

Sustainable Development Society (Sundesh) is a non-profit organization started by

S.K Burman, the founder of Dabur India Ltd., and devoted to the cause of the

upliftment of the society by carrying out welfare activities in the spheres of health

care, education and other socio-economic activities. Darbur drives its corporate social

responsibility (CSR) initiatives through Sundesh.

Dabur has been ranked as the 45th most trusted brand in India by The Brand Trust

Report, India study 2011.


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3.13 DLF LIMITED

DLF Limited (BSE: 532868, NSE: DLF) is the largest commercial real estate

developer in India. It was founded by Raghuvendra Singh in 1946 and is based in

New Delhi, India.[1] DLF developed residential colonies in Delhi such as Shivaji

Park (their first development), Rajouri Garden, Krishna Nagar, South Extension,

Greater Kailash, Kailash Colony, and Hauz Khas. DLF builds residential, office, and

retail properties.

With the passage of Delhi Development Act in 1957, the local government assumed

control of real estate development in Delhi and banned private real estate developers.

As a result DLF began acquiring land at relatively low cost outside the area controlled

by the Delhi Development Authority, in the district of Gurgaon, in the adjacent state

of Haryana. In the mid-1970s, the company started developing their DLF City project

at Gurgaon. Its plans include hotels, infrastructure and special economic zones-related

development projects.[2]

The company is headed by Indian billionaire Kushal Pal Singh. Kushal Pal Singh,

according to the Forbes listing of richest billionaires in 2009, was the 98th richest

man in the world and the world's richest property developer. The company's US$ 2

billion IPO in July, 2007 was India's biggest IPO in history.[3] In its first quarter

results for the period ending 30 June 2007, the company reported a turnover of Rs.

3,120.98 Crore and profits after taxes of Rs. 1,515.48 Crore.


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3.14 FORTIS HEALTHCARE LIMITED

Fortis Healthcare Limited BSE: 532843 is an established chain of super speciality

hospitals based in Delhi also available in Amritsar, Kolkata, Navi Mumbai, Mohali,

Jaipur, Chennai, Kota, Bangalore.

On 12 March 2010, Fortis healthcare had bought 23.9% stakes in Singapore's

Parkway Holdings Ltd.

Fortis Healthcare has been established with a vision to become a global leader in the

field of integrated healthcare.

It is one of the fastest growing integrated healthcare providers with multi-vertical

presence that touches millions of lives across 10 countries including Australia,

Canada, Dubai, Hong Kong, India, Mauritius, New Zealand, Singapore, Sri Lanka and

Vietnam.

Fortis Healthcare has multi-vertical presence in emerging markets in different

healthcare verticals ranging from primary healthcare, day care speciality healthcare,

hospitals, dental clinics and diagnostics. Today, its combined network c

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