Performance of

Indian Stock Market

Made by Emon Bora

● Introduction
● History
● Performance in national level(BSE sensex and NSE Nifty)
● Performance in international level(
● Future speculation
● Dark side of stock market
● Conclusion
 Introduction
Indian Stock Market is one of the oldest Stock Market in Asia. East India Company used to transact
Loan Securities by the end of 19th Century.

The Indian stock market is counted as one of the world’s best performing markets. The NSE today is
the second fastest growing stock exchange in the world besides being the world’s third largest Stock
Exchange in terms of the number of trades in equities. The BSE, is the 11th largest stock exchange in
the world besides being cited as the world's best performing shares market.

With launch of online trading in the Indian stock market, first by NSE and then by the BSE, the
investors count increased in large numbers. India is currently the second fastest developing
economy in the world and given the huge growth potential, the count of foreign investors is
increasing too.
History- Pre Independence Era
Security trading in India goes back to the 18th century when the East India Company began trading in
loan securities. Corporate shares started being traded in the 1830s in Bombay with the stock of Bank
and Cotton presses. The simple and informal beginnings of stock exchanges in India take one back to the
1850s when 22 stockbrokers began trading opposite the Town Hall of Bombay under a banyan tree.

The shift continued taking place as the number of brokers increased, finally settling in 1874 at what is
known as Dalal Street This as yet informal group known as the Native Share and Stockbrokers
Association organized themselves as the Bombay Stock Exchange (BSE) in 1875.

The BSE is the oldest stock exchange in Asia and was the first to be granted permanent recognition
under the Securities Contract Regulation Act, 1956. The BSE was followed by the Ahmedabad Stock
Exchange in 1894 which focused on trading in shares of textile mills. The Calcutta Stock Exchange began
operations in 1908 and began trading shares of plantations and jute mills. The Madras Stock Exchange
followed, being set up in 1920.
History - Post Independence Era
Since 1951, there has been a steady growth of Indian capital market. In order to strengthen the capital market, two
important Acts were passed, namely, Indian Companies Act 1956 and Securities (Contract and Regulation) Act
1956. The Government had taken a number of measures to promote more joint stock companies. The interest of
investors was also safeguarded by the passing of the above mentioned Acts. 19 stock exchanges were recognized
by 1956 and in the primary market, enormous amount of capital raised.

The BSE dominated the volume of trading after Independence. However, the low level of transparency and
undependable clearing and settlement systems, increased the need for a financial market regulator. It was at
this time, the Securities and Exchange Board of India(SEBI) was born in 1988 as a non-statutory body, which
was further given statutory status in 1992. The need for another stock exchange large enough to compete
with BSE and need for transparency in stock market, gave birth to the National Stock Exchange(NSE).
 Performance in BSE SENSEX
The BSE Sensex extended early gains and closed 275 points higher at a fresh record of 65,480 on
Tuesday, stretching the recent strong momentum for Indian equities as the RBI’s comparatively low
interest rates, India’s strong growth, and a flight away from Chinese assets continue to support
sustained foreign inflows into the Bombay Exchange. Recent data showed that investors purchased
more than net INR 1.1 trillion of Indian equities this fiscal year, on track to swing from net divestments
in the two prior years. Gains in the session were led by the tech sector, with Tech Mahindra adding
2.5% while TCS, Wipro, and Infosys advanced more than 1% each. In the meantime, Bajaj Finance
soared by 7.3% after reporting a 34% growth in new loans during June.
Performance in NSE NIFTY

Nifty 50 is owned and managed by NSE Indices (previously known as India Index Services & Products Limited),
which is a wholly owned subsidiary of the NSE Strategic Investment Corporation Limited. The Nifty 50 index was
launched on 22 April 1996, and is one of the many stock indices of Nifty.

The NIFTY 50 index has shaped up to be the largest single financial product in India, with an ecosystem consisting
of exchange-traded funds (onshore and offshore), and futures and options at NSE and SGX.NIFTY 50 is the
world's most actively traded contract. Between 2008 & 2012, the NIFTY 50 index's share of NSE market fell from
65% to 29% due to the rise of sectoral indices like NIFTY Bank, NIFTY IT, NIFTY Pharma, and NIFTY Next 50.

The NIFTY 50 index covers 13 sectors of the Indian economy and offers investment managers exposure to the
Indian market in one portfolio. As of January 2023, NIFTY 50 gives a weightage of 36.81% to financial services
including banking, 14.70% to IT, 12.17% to oil and gas, 9.02% to consumer goods, and 5.84% to automobiles.
 Performance in International Market
The Dollar Index is the index that affects most markets all over the globe, and naturally, the Indian
market too. If you glance at the global share market today, you will find out a lot about the way the
Indian stock market is moving and the trends you may have to consider. The world's markets are
linked, and the effects of portfolio investors and hedge funds may spread quickly across markets.

One of the macroeconomic elements that has a significant impact on the Indian stock markets is the
dollar index. Traders should be aware that the dollar index and the Indian stock market have an
adverse connection. The reason for this is that when the dollar index declines, FIIs invest more in
Indian stocks, which provide higher returns than dollars. The technical analyst may readily analyse
the dollar index with NIFTY 50 to determine the market's current situation. The Indian stock markets
have suffered as a consequence of the growing dollar value. In the Indian stock market, there are a
few industries that have suffered disproportionately in contrast to others.
Future Speculation
Most brokerage firms are laying the foundation of notions for a stock market that is going to
be trudging along instead of racing ahead. Reports from financial analysts are also
confirming this. The expected nature of the Indian stock market, or any stock market for that
matter, is to be volatile with periods of highs and lows. Still, investors who have just achieved
periods of high profits cannot believe it may end soon.

The Nifty 50 shows a recession at 6% and this is going higher. With an all-time high in
October 2021, the fall is akin to a break in a nearly single-sided rally driven by huge liquidity.
The most important factor that laid bare the ‘beasts’ in the stock market in the previous two
years was cash. In December 2021, FIIs or foreign institutional investors sold securities to
the tune of Rs. 12,986 crores ($1.7 billion). Forget the massive outflow, but it was the third
consistently active month of the outpouring of foreign cash. As of December 2021, there was
selling going on in a back-to-back fashion. The Indian stock market relies on the steady
inflow of funds and this is the lifeblood of emerging markets. A balance has to be struck with
a gush of wealth pouring in as much as it pours out. Hence, with this unhealthy balance, the
Indian rupee fell and inflation has struck.
Case Study - WIPRO Wealth Creation Story
Assume you bought 100 shares of WIPRO in 1990. At that time, the face value of one stock of WIPRO was Rs
10. For simplicity, we are considering that you bought the stocks at the face value. Hence, your initial investment
would have been Rs 1,000.

Since 1990, WIPRO has given seven bonuses to its shareholders and one stock split (till 2017). Let’s also
assume that you didn’t touch the stock after buying. This means that you didn’t sell any stock since the purchase
and also avoided any profit booking.

Now, let us analyze the bonuses and stock split of WIPRO for past 27 years.
● 1990: 100 shares
● 1992: 200 shares (1:1 bonus on 12-08-1992)
● 1995: 400 shares (1:1 bonus on 24-02-1995)
● 1997: 1,200 shares (2:1 bonus on 20-10-1997)
● 1999: 6,000 shares (5:1 split on 27-09-1999)
● 2004: 18,000 shares (2:1 bonus on 25-06-2004)
● 2005: 36,000 shares (1:1 bonus on 22-08-2005)
● 2010: 60,000 shares (2:3 bonus on 15-06-2010)
● 2017: 1,20,000 shares (1:1 bonus on 13-06-2017)
Capital Appreciation:
Let’s find out the current worth of the 100 shares that you bought in 1990.
As of May 2018, the market price of one share of Wipro is Rs 273.75
Total Number of share= 1,20,000
Net Value = Rs 273.75 * 1,20,000 = Rs 3,28,50,000.
The net appreciated value would be worth over 3.28 crores.
Your small investment in the 100 shares of WIPRO in 1990 would have turned out to be worth over 3.28 crores in
next 27 years.
Don’t forget the dividends…
In the last 27 years, WIPRO has given a decent annual dividend to its shareholders. However, here we are just
considering the dividends for the last four years.
Annual dividend per share by WIPRO for last 4 years–2014: Rs 8.00
● 2015: Rs 12.00
● 2016: Rs 6.00
● 2017: Rs 4.00
Annual dividend received by the shareholders can be calculated using this formula:
Annual dividend received= Dividend per share * Total Number of shares
Assuming that you bought 100 shares of WIPRO in 1990, here are the annual dividends that you would have
received:
● Dividends (2014) = Rs 8 * 60,000 = Rs 4,80,000
● Dividends (2015) = Rs 12 * 60,000 = Rs 7,20,000
● And Dividends (2016) = Rs 6 * 60,000 = Rs 3,60,000
Moreover, for the year 2017, the total number of shares in your portfolio would have turned out to be 1,20,000.
Dividends (2017) = Rs 4 * 1,20,000 = Rs 4,80,000
Overall, you would have received dividends worth Rs 4,80,000 in just an year by literally doing nothing.
Dark Sides of Indian stock exchange
1. Insider Trading - Insider trading is the trading of a public company's stock or other
securities (such as bonds or stock options) based on material, nonpublic information
about the company. In various countries, some kinds of trading based on insider
information are illegal. This is because it is seen as unfair to other investors who do not
have access to the information, as the investor with insider information could potentially
make larger profits than a typical investor could make.

For example an employee of Apple gets the information regarding company is going to
launch a new product. The release of new product can increase the price of the shares
of Apple. The employee can tip his friends to buy shares so that his friends can earn
good profit. This is known as Insider Trading.
2. Pump and Dump Scheme:-

Pump and dump (P&D) is a form of securities fraud that involves artificially inflating the price
of an owned stock through false and misleading positive statements, in order to sell the
cheaply purchased stock at a higher price. Once the operators of the scheme "dump" (sell)
their overvalued shares, the price falls and investors lose their money. This is most common
with small-cap cryptocurrencies. and very small corporations/companies, i.e. "microcaps".
While fraudsters in the past relied on cold calls, the Internet now offers a cheaper and easier
way of reaching large numbers of potential investors through spam email, investment
research websites, social media, and misinformation.
For example

Luke and Lucas are stock market investors. Lucas buys 1000 shares of a company for $5, a
total investment of $5000. He then starts spreading fake news that, as perLuke and Lucas are
stock market investors. Lucas buys 1000 shares of a company for $5, a total investment of
$5000. He then starts spreading fake news that, as per inside information, the firm is turning
into a public sector entity due to outstanding performance.
Soon, the stock price goes up to $30 in three days. Luke observes that the price is going up.
He buys 1000 shares of the company at $30 each, taking his investments to $30000.Soon,
the share price rises to $50 a share. Lucas decides to exit the market to pocket profits. He
sells all of his shares and makes a profit of $45000. With the rumors ending and no
substantial growth, the share price slides down to $5 a share. While Lucas swims in his
profits, Luke goes into debt.
3. Short and Distort :- "Short and distort" is a type of securities fraud in which investors
short sell a stock and then spread negative rumors about the company in an attempt to drive
down stock prices.

It is often performed as a form of naked short selling in which stock is sold without being
borrowed and without any intent to borrow. Once the stock price has declined, the investor
uses the proceeds of the initial sale to buy a larger number of the company's shares than sold
originally. Some of the newly purchased stock is used to fulfill the short-selling contract; the
remaining shares are then offered for sale, which causes an additional decline in the
company's share price.
4. Corporate executives may be able to control their profits:-

Yes, corporate executives can and do manipulate their earnings. This is one of the
unpleasant realities of the stock market. Everyone wants to put money into a fast-growing
business. What more significant indicator of growth than a company’s earnings constantly
increasing?

When the market begins to expect remarkable results from the company quarter after

quarter, it puts a lot of pressure on its management to deliver on those promises. When

they fail to do so, they may distort their results to avoid dropping their stock price.There

have been several cases of firms being found guilty of falsifying financial accounts.
5. Stock Market Bubble:-

A stock market bubble is a type of economic bubble taking place in stock markets when market
participants drive stock prices above their value in relation to some system of stock valuation.
Behavioral finance theory attributes stock market bubbles to cognitive biases that lead to groupthink
and herd behavior. Bubbles occur not only in real-world markets, with their inherent uncertainty and
noise, but also in highly predictable experimental markets. In the laboratory, uncertainty is eliminated
and calculating the expected returns should be a simple mathematical exercise, because participants
are endowed with assets that are defined to have a finite lifespan and a known probability distribution
of dividends. Other theoretical explanations of stock market bubbles have suggested that they are
rational, intrinsic, and contagious.
Conclusion
The past decade in many ways has been remarkable for securities market in India. It has
grown exponentially as measured in terms of amount raised from the market, number of
stock exchanges and other intermediaries, the number of listed stocks, market capitalization,
trading volumes and turnover on stock exchanges, and investor population. Along with this
growth, the profiles of the investors, issuers and intermediaries have changed significantly.
The market has witnessed several institutional changes resulting in drastic reduction in
transaction costs and significant improvements in efficiency, transparency, liquidity and
safety. In a short span of time, Indian derivatives market has a place in list of top global
exchanges. In single stock futures category, the Futures Industry Association placed NSE in
second position in the year 2000. This study discusses about the performance of NSE and
BSE in India and suggestions to improve their performance.
Bibliography
● Wikipedia
● Youtube
● Inventiva
● Mindstick