CHAPTER-1

INTRODUCTION

A stock market, equity market or share market is the aggregation of buyers and
sellers (a loose network of economic transactions, not a physical facility or discrete entity)
of stocks (also called shares), which represent ownership claims on businesses; these may
include securities listed on a public stock exchange, as well as stock that is only traded
privately. Examples of the latter include shares of private companies which are sold to
investors through equity crowd funding platforms. Stock exchanges list shares of common
equity as well as other security types, e.g. corporate bonds and convertible bonds.

The rise and fall in stock prices tend to influence numerous economic factors, including
consumption and business investment. Moreover, just as how the stock market affects the
economy, several conditions also impact the stock market.
1.1 Concept of Stock Market
The concept of stock markets came to India in 1875, when Bombay Stock Exchange (BSE)
was established as „The Native Share and Stockbrokers Association', a voluntary non-profit
making association. We all know it, the Bhaji market in your neighborhood is a place
where vegetables are bought and sold. Like Bhaji market, a stock market as a place where
stocks are bought and sold. The stock market determines the day's price for a stock through
a process of bid and offer. You bid to buy a stock and offer to sell the stock at a price.
Buyers compete with each other for the best bid, i.e. the highest price quoted to purchase a
particular stock. Similarly, sellers compete with each other for the lowest price quoted to
sell the stock. When a match is made between the best bid and the best offer a trade is
executed. In automated exchanges high-speed computers do this entire job. Stocks of
various companies are listed on stock exchanges. Presently there are 23 stock markets In
India. The Bombay Stock Exchange (BSE), the National Stock Exchange (NSE) and the
Calcutta Stock Exchange (CSE) are the three large stock exchanges. There are many small
regional exchanges located in state capitals and other major cities. Presently Nifty and
Sensex are moving around to 5900 and 19600 (July 2013). All activities of Indian stock
market are regulated and controlled by SEBI.

1
Investors Preference In Stock Market
Though most of the investors want a safe and secure return on their investment, they also look for
maximum returns. The pure debt investment brings an average return with lesser liquidity as
compared to the equity investments. So in search of higher return (keeping the risk factor in mind)
investor are a heading towards equity investment on analysis of recent year investment trends, FII,
entrance and operations in Indian stock markets, it has been found that equity is gaining ground in
India. The main attraction of equity among investors are
1. Higher return (especially I case of capitalization and dividend if any)
2. Higher Liquidity
3. Option to start trading with small investments
4. Daily trading

Investment Alternative
Non- Marketable Financial Assets: A good portion of financial assets is represented by non
marketable financial assets. These can be classified into the following broad.
• Bank deposits
• Post office deposits
• Company deposits
• Provident fund deposits

Equity Shares: Equity shares represent ownership capital. As an equity shareholder, you have
an ownership stake in the company. This essentially means that you have a residual interest in
income and wealth.
 Blue chip shares
 Growth shares
 Income shares
 Cyclical shares
 Speculative shares

Bonds: Bonds or debentures represent long terms debt instruments.

 Government Securities
 Savings bonds
 Government agency securities
 PSU bonds
 Debentures of private sector companies
2
Money Market Instruments: Debt instruments which have a maturity of less than one
year at the time of issue are called money market instruments.
 Treasury bills
 Commercial paper
 Certificates of deposit

Mutual Funds: Instead of directly buying equity shares and/or fixed income
instruments, you can participate in various schemes floated by mutual funds.
 Equity schemes
 Debt Schemes
 Balanced schemes

Life Insurance: In a broad sense, life insurance may be viewed as and investment. Insurance
premiums represent the sacrifice and the assured sum, the benefits.

 Money back policy

 Whole back policy
 Terms assurance policy
Real Estate: FOR the bulk of the inverters the important asset in their portfolio is a
residential house.
 Agricultural land
 Semi urban land
 Commercial property

Precious Objects: Precious objects are items that are generally small in size but highly
valuable in monetary terms. Some important precious objects are:
 Gold and Silver
 Precious stones
 Art objects

Financial Derivatives: The term „derivative‟ indicates that it has no independent

value i.e. its value is entirely derived from the value of underlying asset. The
underlying asset can be securities, commodities, currency etc. Some important
financial derivatives:

3
  Forward
 Future
 Option warrants
 swaps

Inflation's Impact on Stock Returns Key Points

 Rising inflation has an insidious effect: input prices are higher, consumers can
purchase fewer goods, revenues, and profits decline, and the economy slows
for a time until a measure of economic equilibrium is reached.

 Value stocks perform better in high inflation periods and growth stocks
perform better during low inflation.
 When inflation is on the upswing, income-oriented or high- dividend-
paying stock prices generally decline.
 Stocks overall do seem to be more volatile during highly inflationary
periods.
Stocks are categorized in various ways
One way is by the country where the company is domiciled. For example, Nestlé and
Novartisare domiciled in Switzerland, so they may be considered as part of the Swiss stock
market, although their stock may also be traded on exchanges in other countries, for example,
as American depository receipts .(ADRs) on U.S. stock markets.

Stock Exchanges In India

Stock Exchange (also known as stock market or share market) is one of the main
integral part of capital market in India. It plays a vital role in growing industries
and commerce of a country which eventually affect the economy. It is well
organized market for purchase and sale of corporate and other securities which
facilitates companies to raise capital by pooling funds from different investors as
well as act as an investment intermediary for investors. Moreover, it ensures that
securities should be traded according to some pre defined rules and regulations.
London Stock Exchange is the oldest stock exchange in the world whereas
Bombay Stock Exchange is the oldest one in India.

4
 In India, there are 7 Stock Exchanges out of which NSE and BSE are the two main
indices. Most of the trading in Indian Stock Market takes place on these two stock
exchanges. Both the exchanges follow the same trading hours, trading mechanism,
settlement process etc. At the last count, BSE comprises of 5800 listed firms
whereas on the other hand its rival NSE consists of 1659 listed firms. Interestingly,
out of all the firms listed on BSE, only around 500 firms constitutes more than 90 %
of its market capitalization.

Bombay Stock Exchange (BSE) is the leading and fastest stock exchange in India as
well as in South Asia established in 1875. Bombay stock exchange is the world's 11th
largest stock market by market capitalization at $1.7 trillion as of 31 January 2015
(Monthly Reports, World Federation of Exchanges). More than 5,000 companies are
listed on BSE. The main index of Bombay stock exchange is Sensex which comprises
of 30 stocks.

National Stock Exchange was incorporated in 1992 as a tax paying company and
was recognized as a stock exchange in 1993 under the Securities Contracts
(Regulation) Act 1956. NSE is the 12th largest stock exchange in the world with a
market capitalization of more than US$ 1.65 trillion as on 31 January 2015 (Monthly
Reports, World Federation of Exchanges). Moreover, it was the first exchange to
provide fully automated screen based electronic trading system. Nifty is the indices to
measure overall performance of the National Stock Exchange which comprises of 50
stock index.

Functions of Stock Exchange

The Stock Exchange serves two critical functions:
 It provides a critical link between companies that need funds to set up new business or
to expand their current operations and interested investors.
 Stock Exchange also acts as a guide for the investors that have excess funds to invest
in such companies.

 The main aim of this study is to determine the impact of various economic variables on
the performance of stock market of selected listed IT companies on NSE.

5
Sector Indicators
There are number of sectors or industries which are listed on National Stock Exchange and

Bombay Stock Exchange. In addition to this, an individual sector comprises of number of

companies. There are around 73 sectors listed on NSE and BSE seperately. Some of the

important

sectors present on both the exchanges are as follows:-

 Banking Sector
 Automobile Sector
 Information Technology Sector
 Metal Sector
 Real Estate Sector
 FMCG Sector
 Media & Entertainment Sector
 Pharmaceuticals Sector
 Power Sector
 PSU Bank Sector

1.2 Objectives of the study

1. To Study the Role of Stock market in Indian economy

2. To know the impact of Stock Market in Indian Economy

Scope of study

1. Data covered in study was taken for the month of December 2021.

2. The research conducted in November 2021.

3. Study focuses on the Stock Market in Indian Economy.

4. Study categories in various securities in different sector of stock market.

6
1.3 Research Methodology

The present study is titled as “Impact of Stock Market on Indian Economy”

• Title of the study

A project report on Impact of Stock Market on Indian Economy

• Nature of Research
The study adopted descriptive research method

• Purpose of the study

To study about the Stock market in detail.

• Data & research method

This study has been done through secondary sources such as, books, websites, and news. To
understand the impact of stock market in Indian economy.
• Tools for Analysis & Data Presentation
o Tables
o Bar Graph
o Column Chart
o Line Graph

1.4 Limitations Of study

The limitations of the study are those characteristics of design or methodology that impacted or
influenced the interpretation of the findings from your research. Study limitations are the
constraints placed on the ability to generalize from the results, to further describe applications to
practice, and/or related to the utility of findings that are the result of the ways in which you
initially chose to design the study or the method used to establish internal and external validity or
the result of unanticipated challenges that emerged during the study.

7
 CHAPTER-2

REVIEW OF LITERATURE

A number of studies have established a positive relationship between economic growth and
stock market development. It has been supported by several empirical studies such as those of
Atje and Jovanovich (1993), Levine and Zervos (1993, 1998), Rousseau and Wachtel (2000)
and Beck and Levine (2004). Atje and Jovanovich (1993) showed that stock markets have long
run impacts on economic growth by manipulating liquidity, risk diversifications, acquisition of
information about firms, corporate governance and savings mobilization. These studies suggest a
strong positive relationship between stock market development and growth rates of real GDP per
capita although they have failed to discuss the importance of stock market development,
banking sector development and economic growth in an integrated framework. The works of
Levine and Zervos (1995) and Demirguc- Kunt (1994) show that stock markets and banking
sector development can give a big boost to economic development. Rousseau and Wachtel
(2000), Beck and Levine (2004) were also of the opinion that with a well -functioning financial
sector or banking sector, stock markets can give a big boost to economic development.
Gupta (1972) in his book has studied the working of stock exchanges in India and has given a
number of suggestions to improve its working. The study highlights the' need to regulate the
volume of speculation so as to serve the needs of liquidity and price continuity. It suggests the
enlistment of corporate securities in more than one stock exchange at the same time to improve
liquidity. The study also wishes the cost of issues to be low, in order to protect small investors

Panda (1980) has studied the role of stock exchanges in India before and after independence.
The study reveals that listed stocks covered four-fifths of the joint stock sector companies.
Investment in securities was no longer the monopoly of any particular class or of a small group
of people. It attracted the attention of a large number of small and middle class individuals. It
was observed that a large proportion of savings went in the first instance into purchase of
securities already issued.
Gupta (1981) in an extensive study titled `Return on New Equity Issues' states that the
investment performance of new issues of equity shares, especially those of new companies,
deserves separate analysis. The factor significantly influencing the rate of return on new issues to
the original buyers is the `fixed price' at which they are issued. The return on equities includes
dividends and capital appreciation. This study presents sound estimates of rates of return on
equities, and examines the variability of such returns over time.
8
 Jawahar Lal (1992) presents a profile of Indian investors and evaluates their investment
decisions. He made an effort to study their familiarity with, and comprehension of financial
information, and the extent to which this is put to use. The information that the companies
provide generally fails to meet the needs of a variety of individual investors and there is a
general impression that the company's Annual Report and other statements are not well received
by them.

Debjit Chakraborty (1997) in his study attempts to establish a relationship between major
economic indicators and stock market behaviour. It also analyses the stock market reactions to
changes in the economic climate. The factors considered are inflation, money supply, and growth
in GDP, fiscal deficit and credit deposit ratio. To find the trend in the stock markets, the BSE
National Index of Equity Prices (Natex) which comprises 100 companies was taken as the index.
The study shows that stock market movements are largely influenced by, broad money supply,
inflation, C/D ratio and fiscal deficit apart from political stability.

Redel (1997) concentrated on the capital market integration in developing Asia during the period
1970 to 1994 taking into variables such as net capital flows, FDI, portfolio equity flows and bond
flows. He observed that capital market integration in Asian developing
countries in the 1990‟s was a consequence of broad-based economic reforms, especially in the trade
and financial sectors, which is the critical reason for economic crises which followed the
increased capital market integration in the 1970s in many countries will not be repeated in the
1990s. He concluded that deepening and strengthening the process of economic liberalization
in the Asian developing countries is essential for minimizing the risks and maximizing the benefits
from increased international capital market integration.

Avijit Banerjee (1998) reviewed Fundamental Analysis and Technical Analysis to analyse the
worthiness of the individual securities needed to be acquired for portfolio construction. The
Fundamental Analysis aims to compare the Intrinsic Value (I.V.) with the prevailing market price
(M.P) and to take decisions whether to buy, sell or hold the investments. The fundamentals
of the economy, industry and company determine the value of a security. If the 1.V is greater
than the M.P., the stock is under priced and should be purchased. He observed that the
Fundamental Analysis could never forecast the M.P. of a stock at any particular point of time.
Technical Analysis removes this weakness. Technical Analysis detects the most appropriate time
to buy or sell the stock. It aims to avoid the pitfalls of wrong timing in the investment decisions.
He also stated that the modern portfolio literature suggests 'beta' value p as the most acceptable
measure of risk of scrip.

9
Madhusudan (1998) found that BSE sensitivity and national indices did not follow random walk by
using correlation analysis on monthly stock returns data over the period January 1981 to December
1992.

Arun Jethmalani (1999) reviewed the existence and measurement of risk involved in investing in
corporate securities of shares and debentures. He commended that risk is usually determined, based
on the likely variance of returns. It is more difficult to compare 80 risks within the same class
of investments. He is of the opinion that the investors accept the risk measurement made by the
credit rating agencies, but it was questioned after the Asian crisis. Historically, stocks have been
considered the most risky of financial instruments. He revealed that the stocks have always
outperformed bonds over the long term. He also commented on the 'diversification theory'
concluding that holding a small number of non-correlated stocks can provide adequate risk
reduction. A debt-oriented portfolio may reduce short term uncertainty, but will definitely
reduce long-term returns. He argued that the 'safe debt related investments' would never
make an investor rich. He also revealed that too many diversifications tend to reduce the
chances of big gains, while doing little to reduce risk. Equity investing is risky, if the money will
be needed a few months down the line. He concluded his article by commenting that risk is not
measurable or quantifiable. But risk is calculated on the basis of historic volatility. Returns are
proportional to the risks, and investments should be based on the investors' ability to bear the
risks, he advised.

Suresh G Lalwani (1999) emphasised the need for risk management in the securities market
with particular emphasis on the price risk. He commented that the securities market is a 'vicious
animal' and there is more than a fair chance that far from improving, the situation could deteriorate.
Bhanu Pant and Dr. T.R.Bishnoy (2001) analyzed the behaviour of the daily and weekly
returns of five Indian stock market indices for random walk during April 1996 to June 2001.They
found that Indian Stock Market Indices did not follow random walk. TRANS Asian Research
Journals http://www.tarj.in 77 A Publication of TRANS Asian Research Journals TAJMMR TRANS
Asian Journal of Marketing & Management Research Vol.2 Issue 7, July 2013, ISSN 2279-0667
Nath and Verma (2003) examine the interdependence of the three major stock markets in south
Asia stock market indices namely India (NSE-Nifty) Taiwan (Taiex) and Singapore (STI) by
employing bivariate and multivariate co integration analysis to model the linkages among the
stock markets, No co -integration was found for the entire period (daily data from January 1994
to November 2002).They concluded that there is no long run equilibrium.

10
Debjiban Mukherjee (2007) made a comparative Analysis of Indian stock market with
International markets. His study covers New York Stock Exchange (NYSE), Hong Kong Stock
exchange (HSE), Tokyo Stock exchange (TSE), Russian Stock exchange (RSE), Korean Stock
exchange (KSE) from various socio- politico-economic backgrounds. Both the Bombay Stock
exchange (BSE) and the National Stock Exchange of Indian Limited (NSE) have been used in the
study as a part of Indian Stock Market. The main objective of this study is to capture the trends,
similarities and patterns in the activities and movements of the Indian Stock Market in
comparison to its international counterparts. The time period has been divided into various eras
to test the correlation between the various exchanges to prove that the Indian markets have become
more integrated with its global counterparts and its reaction are in tandem with that are seen
globally. The various stock exchanges have been compared on the basis of Market Capitalization,
number of listed securities, listing agreements, circuit filters, and settlement. It can safely be said that
the markets do react to global cues and any happening in the global scenario be it macroeconomic
or country specific (foreign trade channel) affect the various markets.

Juhi Ahuja (2012) presents a review of Indian Capital Market & its structure. In last decade or so,
it has been observed that there has been a paradigm shift in Indian capital market. The
application of many reforms & developments in Indian capital market has made the Indian capital
market comparable with the international capital markets. Now, the market features a
developed regulatory mechanism and a modern market infrastructure with growing market
capitalization, market liquidity, and mobilization of resources. The emergence of Private
Corporate Debt market is also a good innovation replacing the banking mode of corporate
finance. However, the market has witnessed its worst time with the recent global financial crisis
that originated from the US sub-prime mortgage market and spread over to the entire world as a
contagion. The capital market of India delivered a sluggish performance.

11
 CHAPTER-3
DATA ANALYSIS

3.1 The Impact of Stock Market on the Indian Economy

The rise and fall in stock prices tend to influence numerous economic factors, including
consumption and business investment. Moreover, just as how the stock market affects the
economy, several conditions also impact the stock market. Here are some of the ways in which the
stock market affects our economy:

Wealth effect

The markets get their volatile character from the price fluctuations of individual stocks. As
prices increase or decrease, market volatility influences businesses and consumers. During a bull
phase, the stock prices go up. More often than not it boosts the economy’s overall confidence.
Likewise, consumer spending also rises as individuals become more optimistic regarding the
market and buy more goods and services. So, businesses offering these products and services
begin to produce and sell more.
Additionally, a larger number of investors may enter the market which may push prices
even higher. As a result, positive stock market movements can contribute towards economic
development. However, this is not always the case.
A rise in stock markets is not always coupled with economic growth. If you see 2021-22,
stock markets breached all-time highs consistently and millions of new Demat accounts opened
during this period; but our growth, measured by GDP, fell in almost every quarter during the
financial year. This was because of the pandemic.

When stock markets fall

In contrast, when stock prices fall for a considerable period (known as the bear phase), they
mostly affect negatively. Individuals may lose their optimism, with news reports on these
price drops creating a sense of panic in the market. As a result, investors losing money are
reluctant to spend more or turn to lower-risk assets, leading to a fall in consumer spending.

12
Influences pension fund

Any individual with an investment trust or private pension is affected by stock market
movements, albeit indirectly. Many pension funds invest a considerable part in stocks; a
drastic and consistent fall in prices can impact the value of these funds. This also indicates
lower payouts in the future. Furthermore, households will have a lower income from
pension, pushing them away from spending and saving more money.

Positively impacts the bond market

A stock market crash generally makes other investment vehicles more attractive for investors.
As a result, they can move out of shares and turn to invest in bonds or gold. In fact, these
investment instruments are known to offer higher returns during periods of uncertainty.

3.2 Role of Stock Markets in the Economic Growth of India

The role of stock markets as a source of economic growth has been widely debated. It is well
recognised that stock markets influence economic activity through the creation of liquidity.
Liquid financial market was an important enabling factor behind most of the early innovations
that characterised the early phases of the Industrial Revolution.

Advances in this area reveal that stock markets remain an important conduit for enhancing
development. Many profitable investments necessitate a long-term commitment of capital, but
investors might be reluctant to relinquish control of their savings for long periods. Liquid
equity markets make investments less risky and more attractive.
At the same time, companies enjoy permanent access to capital raised through equity issues.
By facilitating longer-term and more profitable investments, liquid markets improve the
allocation of capital and enhance the prospects for long-term economic growth. Furthermore,
by making investments relatively less risky, stock market liquidity can also lead to more
savings and investments.

13
3.3 How did the Indian markets perform in 2021?
A comparison of BSE Sensex with 10 major world indices across nine countries indicates
that it has shown the best performance among major Asian economies in the current year
and has the second-best performance in the world.

In nominal terms, 2021 was the best year for BSE as the Sensex moved by around 10,000
points in a single year.(PTI)

What did 2021 bring for Indian equity markets? In all likelihood, they will close at levels
which are lower than the record high seen during 2021. BSE Sensex, India’s benchmark
equity index reached an all-time high of 62,245 points on October 19. It closed on 57,806
points on December 29. Despite this, India’s equity markets have had the best
performance in Asia. To be sure, there is more to the equity markets story in 2021 than
just headline index numbers. Here is a summary of the performance of Indian equity
markets in 2021.

14
3.4 Best performance in a long-time and across Asia
In nominal terms, 2021 was the best year for BSE as the Sensex moved by around 10,000
points in a single year. The BSE Sensex has gained 10,054 points between January 1,
2021 to December 29, 2021. This is the highest year-on-year increase in absolute terms
historically. Even in percentage terms, the 2021 performance is the best in last four years.
A comparison of BSE Sensex with 10 major world indices across nine countries indicates
that it has shown the best performance among major Asian economies in the current year
and has the second-best performance in the world.

Table 1 Yearly growth in Sensex

Year Yearly Change

2010 17.43
2011 -24.64
2012 25.7
2013 8.98
2014 29.89
2015 -5.03
2016 1.95
2017 27.91
2018 5.91
2019 14.38
2020 15.75
2021 21.25

40
29.89 27.91
30 25.7
21.25
20 17.43 14.38 15.75
8.98
10 5.91
1.95
0
-10 -5.03
-20
-30 -24.64

Series1

15
 Table 2 Growth in major world market indices in 2021

Index Growth/Fall(%)
CAC 40(France) 29
Sensex 21
DJIA(USA) 19
DAX 30(Germany) 16
FTSE 100(UK) 14
MOEX(Russia) 15
STI(Singapore) 9
Nikkei(Japan) 6
SSE(Shanghai) 4
HANG SENG -15

2021’s stock market rally was driven by domestic retail investors

Where did the tailwinds for Indian stock markets come from in 2021? The answer is
mainly domestic retail investors. Numbers on net investment by domestic and foreign
investors and the number of demat accounts – a good proxy for individuals trading in
stock markets – shows this clearly. Foreign investors actually contributed very little to
the stock market rally in 2021. Their net investment as of December 28, 2021 is just
₹26,000 crore, much lower compared to the ₹1 lakh crore plus amounts in 2020 and
2019. Domestic investors, who took out around ₹54,000 crore from the markets last
year, put in ₹82,340 crore until December 22, 2021 this year. The number of new

16
demat accounts continued their rapid momentum from 2020. A total of 27.4 million
new demat accounts were opened in 2021 (numbers until November) compared to the
10.5 million number last year. This number had never crossed 10 million until 2020.

Table 3 Net investment by investors in equity markets (in crores)

Calendar Year Mutual funds FPI investments

2010 -27830 133266
2011 5987 -2714
2012 -20.644 128360
2013 -21147 113136
2014 23843 97054
2015 72197 17808
2016 48169 20568
2017 118774 51252
2018 120735 -33014
2019 52237 101122
2020 -54507 170262
2021 82341 26001

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 Table 4 New demat accounts opened each year

Year New demat accounts opened

2012 1.1
2013 1
2014 1.3
2015 1.7
2016 2.3
Year New demat accounts opened
2017 3.8
2018 4
2019 4.5Mutual funds
200000 2020 10.F5PI investmenst
2021 27.4
150000
100000
50000
0
-50000
-100000

Which sectors performed well?

There are 19 sector-wise indices in the BSE Sensex. All of these have
shown positive growth in 2021 (numbers until December 28). The biggest
gainers in 2021 were the power and realty subsectors, a sharp contrast to
their below-average performance in 2020. The IT subindex continued to
perform well in keeping with its 2020 trend. The fast-moving consumer
goods (FMCG) subindex showed the smallest gains, largely a reflection of
the weak consumer demand in the economy. Among the 30 stocks, which

18
are a part of the BSE S&P Sensex, Tech Mahindra Ltd. was the biggest
80
60
40
20
0
-20

gainer, while Kotak Mahindra Bank Ltd. had the worst performance.

Table 5 BSE sectoral indices yearly growth

Sub -Index 2021 2020
BSE FMCG 8 10.55
BSE Bankex 11 -2.14
BSE Finance 13 0.83
BSE Healthcare 61.45 16
BSE Auto 12.59 17
BSE Oil & Gas -4.44 23
BSE Energy 16.79 24
BSE Consumer goods 20.33 28
BSE Telecom 13.64 38
BSE Consumer 21.52 41
Durables
BSE Metal 11.23 43
BSE Basic Materials 26.07 44
BSE Tech 43.84 45
BSE Capital Goods 10.63 49
BSE IT 56.68 50
BSE Utilities -0.39 54
BSE Industrials 17.79 55
BSE Realty 8.66 55
BSE Power 7.05 59

19
 Table 6 Growth of Sensex firms in 2021

COMPANY Change %
Kotak Mahindra Bank -13
Dr Reddy's -8
Maruti Suzuki -4
Hindustan Unilever -4
IndusInd Bank -3
HDFC 0
HDFC Bank 1
ITC 4
Nestle 5
Power Grid 7
Axis Bank 7
M&M 13
Reliance 17
Asian Paints 18
NTPC 19
TCS 22
Bajaj Finance 23
Bharti Airtel 25
HCL Technologies 27
ICICI Bank 27
UltraTech Cement 29
Sun Pharma 29
L&T 32
Infosys 33
Titan 35
SBI 40
Tata Steel 42
COMPANY Change %
Wipro 45
Bajaj Finserv 45
Tech Mahindra 46

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 The year of IPOs
From Zomato to Paytm, 2021 was the year when some of the biggest Indian start-ups listed
themselves in the stock market. According to data compiled by CareEdge, there were 121 issues of
₹1,18,736 crore in 2021. This amount is the highest ever in India’s stock market history, with the
previous best being ₹67,147 crore in 2017, a CareEdge note said. The IPO listing were distributed
across sectors and 50% of the companies listed at a discount, while 11 out of the 121 companies
listed at more than a 100% premium. If 2021 was a big year for IPO listings, 2022 promises to be
even bigger with the government preparing to list the Life Insurance Corporation of India (LIC).
The LIC IPO is expected to garner ₹1 lakh crore alone, almost at par with all 121 IPOs put
together managed in 2021.

Table 7 IPOs

Sectors Number of IPO's Amount raised

eCommerce 4 36606
Others 36 14032
Automobiles 4 10562
Chemicals 10 9927
Sectors Number of IPO's Amount raised
Finance 3 8567
Insurance 1 6401
Cement and construction 1 5000
Consumer goods 5 4849
Pharma 6 4463
Hospital/healthcare 4 4400
Construction: real estate 4 3111
21
 Engineering 7 3036
IT 5 2703
Retailing 2 2388
Banks 2 1622

Number of IPO's
40
30
20
10
Number of IPO's
0

Amount raised
40000
30000
20000
10000
Amount raised
0

22
 CHAPTER-4

FINDINGS OF THE STUDY

I. The Third Largest in the world of Indian Economy in terms of purchasing

power. It is going to touch new heights in coming years.
II. The Global investment Bank , by after US and China 2035 India would third
largest economy of the world.
III. Movements in the stock market can have a profound economic impact on the
economy and individual consumers.
IV. A collapse in share prices has the potential to cause widespread economic
disruption.This paper deal s with stock market play vital role in growth
of Indian Economy and also the Impact Stock market on Indian
Economy by Way of Conceptual Methodology using to the Journals of
Indian Stock Market.
V. The link between stock market development and economic activity has always
been the subject of considerable debate in the field of economics and it
raises empirical question whether stock marketdevelopment influences
economic activity or whether it is a consequence of increased
economic activity
VI. This study attempts to investigate the direction of causality between stock
market development and economic growth in the Indian context.
Using the cointegration and causality tests for the period June 1991 to
June 2013, the study confirms a well defined long-run
equilibriumrelationship between the stock market development
indicators and economic growth in India.
VII. Theempirical results show bidirectional causality between market
capitalisation and economic growth and unidirectional causality from
turnover ratio to economic growth in the long-run and short-run.
VIII. By and large, it can be inferred that the stock market development indicators
viz. marketcapitalisation and turnover ratio have a positive influence
on economic growth in India.

23
 CHAPTER-5

SCOPE OF FUTURE STUDY

With the development of large-scale machine production it was only natural that
there should be a transition from the system of private partnership to that of corporate
organization, depending for its financial existence and support on the sale of bonds and
stocks. Through the corporate form of organization it became possible to combine the
small savings of the thousands into huge sums, which could then be given a directing force
by the great captains of finance and industry.
The rate at which stocks and bonds have come to represent the wealth of the world
during the past two decades has been so prodigious that our stock exchange markets may
be said to represent the pulse of our economic life. As Mr. Charles Duguid so admirably
says, in his work on "The Stock Exchange": "The institution may be defined as the nerve
center of the politics and finances of nations, because in this market all that makes history
is focused and finds instantaneous expression. It is worthy of being defined as the
barometer of their prosperity and adversity, for a glance at the tone of this market, whose
wares are more mercurial than those of any other mart, suffices to indicate their condition."
Numerous authors and statisticians have attempted to explain the relative importance of
stocks and bonds in the world's wealth. Of these attempts that of Mr. Charles A. Conant
deserves special mention. In an article on "The World's Wealth in Negotiable Securities,"
published in the "Atlantic Monthly" for January, 190o8, Mr. Conant made a detailed
examination of the subject, and while admitting that it is impossible to secure sufficient
data to arrive at a conclusion with absolute precision, he found that the total visible
outstanding securities issued by American corporations aggregated, on June 30, I905, the
enormous total of $34,514,351,382. Of this amount $21,023,392,955 represents the par
valuSince I905 the aggregate has been very materially increased, since as regards New
York Stock Exchange securities alone there has been added from six hundred million to
over one billion dollars worth of new securities annually.
This enormous mass of securities is distributed over the various leading types of
corporations as shown in the table on the next page. Comparing this enormous total of
American stocks and bonds with the total value of the country's physical property, placed
by the Bureau of Census in I904 at $107,104,192,410, it seems that securities represent
nearly one-third of the nation's wealth. It is apparent, however, that a considerable
24
proportion of these securities is owned by holding companies, which are themselves
represented by securities. There is, thus, a duplication of the same capital, which must be
eliminated in order to ascertain the proportion which security values bear to the total value
of the country's wealth. Mr. Conant's figures show that such inter-corporate holdings of
securities aggregated, in 1905, approximately $IO,I20,418,699, thus leaving the net par
value of American stocks and bonds at $24,393,932,683, or approximately 23 per cent of
the nation's wealth. These conclu- sions are not vitiated if we take into account the market
value of such securities, because on June 30, I905, the market value of the thirty-four
billion dollars worth of securities amounted to nearly thirty-five and one-half billion
dollars. Quite as astonishing as the enormous amount of the country's wealth represented
by stocks and bonds, is the wide distribution of ownership. In I903 the author published an
article on the distribu- tion of stock holdings in American railways, in THE ANNALS of
the American Academy, in which he showed that the number of persons who were direct
owners of stock was very much larger than was generally supposed.
Since that article was published the number of stockholders in American
corporations has strikingly increased. Thus the "Journal of Commerce and Commercial
Bulletin," recently collected official statistics for IIO of the largest corporations, with a
total The investigation further shows that in 1907, when quotations were unusually low,
and when the public invaded Wall Street and found stocks upon the bargain counter, the
total number of stockholders aggregated 639,836, with an average holding of 1o7Ys
shares, although the capitalization then only slightly exceeded $6,900,000,000capital stock
outstanding of $7,300,307.

25
 CHAPTER-6

LIMITATION OF THE STUDY

An ownership stake in a company The shares listed in the market are either equity
shares or preference shares convertible to equity shares. These shares allow the
shareholders to have an ownership stake in the issuer company. Exclusivity in transactions
Membership of stock exchange markets and resultantly trading used to be an exclusive
activity. Only the brokers and sub-brokers engaged in market transactions, however with
the introduction of exchanges and particularly online trading it has become quite open to
the general public. Return on investment As the majority of the listed shares are equity
shares their value is directly related to the value of the company, thus when a company is
doing well there is a substantial capital appreciation in the shares of the company which
provides good returns. Good returns on investments in short time As compared to other
investment options in an ordinary scenario the returns on stock market investments are
much faster. For example, the average annual return in real estate is 10.5%, for investments
in gold it is 8.87% and for government saving bonds it is 7.75%. Whereas the returns on
the stock investments on NSE was 16%. Right to vote The equity shares give a right to
vote to the shareholders on the matters concerning their interests. Therefore, the
Companies Act, 2013 requires the approval of shareholders in an annual general meeting or
extraordinary general meeting to take important decisions. This enables the investors of the
company to have a say in the companies’ operations.

26
 CHAPTER-7

CONCLUSION

Stock markets are one of the factors that affect the economy, but there are others as
well. Interest rates affect the economy because rising rates mean higher borrowing
costs. Consumer spending and business investment slows down, which reduces
economic growth.
Falling interest rates can stimulate economic growth. Fiscal policy decisions also can
affect the economy. For example, large budget deficits can reduce government
investments and purchases, which can slow down the economy. Currency fluctuations
can drive up the price of exports, which can harm export-driven economies.
One of the most enduring debates in economics is whether stock market development
causes economic growth or whether it is a consequence of increase deconomic
activity. The presentstudy investigates the direction of causality between stock market
development and economic growth in the Indian context.
Using the cointegration and causality tests for the period June 1991 toJune 2013, the
study confirms a well defined long-run equilibrium relationship among the stock
market development indicators and economic growth in India. Besides, the empirical
results shows bidirectional causality between market capitalisation and economic
growth and unidirectional causation runs from turnover ratio to economic growth in
the long-run and short-run
By and large,it can be inferred that the stock market development indicators viz.
market capitalisation andturnover ratio have a positive influence on economic growth
in India. Therefore, the present studyrecommends that the capital market regulators
should implement effective policy frame works towards the development of Indian
stock market in order to substantially enhance the size, depthand liquidity of the
Indian stock market which in turn leads to increased economic activities.
Further, the government should prioritize the development of the stock market through
relaxing laws and of listing requirements for investors so as to encourage more market
participants on the stock exchange and thus increases competition and quality of
securities investments resulting in a significant influence on economic growth in India.

27
 ECONOMIC GROWTH RATE

• An economic growth rate is the percentage change in the value of all of

the goods and services produced in a nation during a specific period of
time, as compared to an earlier period … in most cases, the economic
growth rate measures the change in a nation’s gross domestic product
(GDP)

• Since there is a direct relationship between the GDP and stock market:
A positive change in the GDP a higher GDP growth number will
invigorate the stock markets, and as a result the market will go up. If the
stock market moves up, it will impact your investment portfolio positively.

28
SUGGESTIONS THESE FACTORS ARE CHANGING INDIAN ECONOMY

Equity Market globally have witnessed an incessant rally, driven initially by attractive
valuations and thereafter by the excessive liquidity to infused by central banks
globally to stablise respective economics. In recent months, the Indian Market had
considerably outperformed global markets and is presently quoting at valuations
which are well above its mean, and at a higher premium to other emerging markets
than that witnessed historically. What should investor now watch out for as leading
economic indicator in the near future?

1. Government actions:- One of the additional drivers of the Indian equity market
during this calendar year has been the Government’s intent to spend on growth for 3
more years by indicating a relatively high fiscal deficit even beyond the present
financial year. With monetary policy normalizing, the onus would shift to the fiscal
growth ove the next couple of years.

2. Investor Flows:-Equity Market are generally driven by four factors: Fundamentals ,

valuations, sentiments and liquidity. Presently, fundamentals and sentiments are positively
inclined, while valuations and liquidity presently don not appear to be as fovourable.
Therefore, while strong 2- year earnings growth prospects drive our positive outlook fo the
equity market the near term outlook is cautions, and the focus could now shift much more
towards specific stocks.

1. Stock market development and economic growth:- Researchers and economists have
paid increased attention to the relationship between financial development and economic
growth, due to previous results that showed controversial perspectives, some of them
identified a positive correlation between the variables and others have significant doubts
on this correlation

29
2. International Economy:- Emerging stock markets have a key role in the international
economy, and their effects on economic growth can be transmitted to the real sector
through their specific channels: liquidity, market capitalization, risk sharing and
diversification. Bencivenga et. al., 1996 offered strong evidences about the contribution of
stock market liquidity in boosting economic growth, through firms informations.

3. Liquidity:- Liquidity, as a stock market indicator, along with a sound and developed
financial banking system, play a key role in accelerating economic growth, Levine, 1997
emphasized the impact of stock markets on economic growth by increasing capital
investments liquidity, assuming that a higher degree of liquidity will allow savers to sell
their shares easily,

4. Policy Initiative:- Policy initiatives have tried to ensure financial stability, curbing
excessive fluctuations and volatility in interest rates, exchange rates and hence moderating
inflation without choking credit to productive sectors, thus mitigating risks arising out of
deregulation and globalization of financial markets and helping in the efficient allocation
of resources in the real sectors of the economy. Most importantly, the capital market
reform was an integral part of the agenda of financial sector reforms in India.

5. Regularatory:- The new regulatory framework laid down by SEBI sought to strengthen
investor protection by ensuring disclosure and transparency rather than through direct
controls. The SEBI has apparently made progress in achieving its major objectives such as
to protect the interests of investors in securities and to promote the development of, and to
regulate, the securities market and for matters connected therewith or incidental thereto.

6. Fundamental Changes:- The Indian stock market has witnessed major fundamental
institutional changes, resulting in drastic reduction in transaction costs and significant
improvements in efficiency, transparency and safety which led the stock exchanges to do a
remarkable task for the economic development of the country. Concurrently, the
economic

30
expansion through technological changes, products and services
innovation in the post reforms period is expected to create a high demand
for the development of stock markets.

BSE SENSEX GRAPH

31
 REFERENCES

1. Ed. note: This article about India‘s stock market outlook for 2019 was originally
published on September 28th, last year. Readers can verify this by checking the dates on the
charts. Throughout 2019 we will frequently update our outlook for India‘s stock market. The
new updates will appear at the bottom of the current outlook. It allows our followers to track
the evolution of India‘s stock market as well as our outlook about India‘s stock market. Last
update of India‘s stocks outlook: February 17th, 2019.

2. Arnold, H. (2004), Schumpeter and Methodological Individualism. Journal of

Evolutionary Economics, 14(2), 153-156.

3. Bencivenga, V.R., Smith, B.D. (1991), Financial Intermediation and

Endogenous Growth. Review of Economic Studies Limited, 58, 195-209.

4. Bodie, Z., Kane, A., Marcus, A. (2005), Investments, (6 th ed.) Asia: McGraw-
Hill Education. Boyle, G.,.

5. Peterson, J. (1995), Monterey Policy, Aggregate Uncertainty, and Stock Market.

Journal of Money, Credit and Banking,

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marketeffect-the-economy-2/

7. https://www.sharetipsinfo.com/indian-economy.html

8. https://finance.zacks.com/stock-stocks-affect-economy-2233.html

9. https://investinghaven.com/markets-stocks/india-stock-market-forecast- 2019/

10. https://www.researchgate.net/publication/
320958534_Role_of_Stock_Market_in_the_Gr owth_of_Indian_Economy=s

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