NHPC IPO

NHPC IPO Subscribed over 3 times on day 1

India`a largest hydel power generator National Hydroelectric Power Corporation (NHPC) IPO, has received an overwhelming response on day 1. It has been over subscribed by 3.54 times on day 1 according to the stock exchanges.

Qualified institutional buyers(QIBs) led the race subscribing by 6 times to the issue. This was followed by retail individual investors and non-institutional investors who subscribed 0.09 times and 0.0062 times respectively. NHPC IPO was fully subscribed within initial minutes of the opening today.A total 5,940,924,150 of bids were received out of which 42,954,275 bids were received at a cut-off price.

The company has fixed a price band at Rs 30- Rs 36 a share. The issue closes on Wednesday, August 12.

Govt to sell 5% stake in NTPC through FPO

NTPC Stake sale is being explored by the Govt according to the FPO plans submitted to Finance Ministry reports CNBC- TV18.

Sources say that the Government is going to sell 5% stake in the company in follow-on public issue, which holds 89.5% stake in NTPC.

Axis Bank IPO / FPO expected soon

Axis Bank IPO / FPO is expected in the next few months according to industry sources. Axis Bank IPO/ FPO is sized roughly around 4000-5000 crores.

In 2007 , Axis bank has raised 4200 crores through an IPO, post the issue it has raised more fund through GDR and ADR subsequently priced at Rs.620 per share.

The bank’s board on Tuesday passed an enabling resolution to raise fresh equity through GDR, qualified institutional placement and preferential issue to promoters. The fresh equity issue could lead to about 10% dilution in the shareholding.

Axis Bank IPO Date , Price , Listing info , Subscription , Allotment status and allocation details , refund , Grey Market trades and analysis will be posted here soon.

India continues to be most attractive outsourcing hub

India continues to be most attractive outsourcing hub

Low-cost advantage and availability of skilled workers make India the most attractive outsourcing hub.
Africa a call center alternative to India?
Some US lawmakers and think tanks believe that Africa can be a much cheaper alternative to call centers in India.
Anti-outsourcing sentiments may hit business: WNS
Indian BPO firm WNS Holdings has cautioned that negative public reaction to outsourcing activities in Western nations could adversely affect its business.
German, UK-based biotech cos eye India for outsourcing
As part of the cost-cutting measures to combat global recession, German and UK-based biotech companies plan to outsource more work, transfer technology and tap India’s burgeoning biotechnology market.
US protectionism will be counter-productive: Premji
Wipro founder Azim Premji stressed that US decision to clamp down on H-1B visas for skilled workers would be counter-productive. Cos that receive maximum H1B
Obama 'committed' to immigration reform
Obama outlines reform, saying people should not be allowed to come to US against law and employers must not exploit low-wage labor. Cos that receive max H1B visas
Protectionism would deepen recession: India
Protectionism in any legal format would also subvert the multilateral processes and prolong the present economic recession and further delay turnaround.
Now US pitches for 'Boston-Bangalore' like bilateral ties
US has called for "advanced" linkages similar to the existing ones between "Manhattan and Mumbai or Boston and Bangalore".
PEs play white knights to BPO companies
PE is undoing a part of US President Barack Obama's drive against outsourcing by pushing companies to send their IT and back-office operations to cheaper destinations.
Protectionism, racist attacks to affect Indians' dollar dreams
Protectionism and racial attacks are likely to affect the Indians' overseas job dreams.
Crowdsourcing: Boon or bane for creative organisations?
Crowdsourcing is the practice of opening up a task to the public instead of keeping it in-house or using a contractor.
Eastern Europe finds favour with Indian BPO cos
IT outsourcing market in Romania, Poland & Bulgaria is in the range of $250-450 mn, which allows Indian BPOs to have smaller centres with niche skills.
US firms lobby against Obama's 'Bangalore Buffalo' rhetoric
American companies have launched a campaign against the new law that ends tax incentives to those firms which create jobs overseas.
Outsourcers go speed dating to sign deals
Some of the big offshoring players are now relying on ‘speed dating’ — a quicker and cheaper channel for selecting the vendor for their back-office and IT outsourcing needs.
8 Indian cities among world's 25 riskiest offshoring locations
A study has named 8 Indian cities among the world's 25 riskiest places for offshoring on concerns like terrorism, pollution and geopolitical issues. India-centric BPOs

Recession Easing

AI staff will be redeployed, size to be cut by halfAI

staff will be redeployed, size to be cut by hal...
Govt approaches Ratan Tata for heading AI
Air India employees to get salaries by July 14
Air India employees to get salaries by July 14
New Delhi: The government is learnt to have decided on a largescale redeployment of Air India (AI) staff to its strategic business units (SBUs), cutting the airline’s current 33,000 strength by nearly 50 per cent.

This will bring down AI’s employees-per-aircraft ratio from a highly uncompetitive 230:1 to a globally accepted 100-150:1.

Minutes of Civil Aviation Minister Praful Patel meeting at the Prime Minister’s Office last month, available with The Indian Express, indicate that the decision was reached after detailed discussions on the carrier’s mounting losses and a presentation by Civil Aviation Secretary M Nambiar.

Top government sources told The Express that around 15,000 employees will be absorbed in the SBUs, which the government expects will become independent profit centres once they are operational.

“The two Maintenance, Repair and Overhaul (MRO) joint ventures with Boeing and Airbus will absorb around 5,000-6,000 employees. The ground handling joint venture with Singapore firm SATS is expected to absorb another 8,000-9,000. These SBUs will be hived off to become independent profit centres,” said a senior official.

For speedy operationalisation of airline’s subsidiary businesses, AI plans to re-designate an existing management position as Executive Director of Corporate Strategy.

AI CMD Arvind Jadhav has asked for finalization of employees service rules and regulations and performance-related standard operating procedures in order to fast-track the integration of the old Air India and Indian Airlines staff. The airline will draw up an action plan for the next 6 months, which will be part of the turnaround plan to be submitted to the government.

The Finance Ministry will review the pricing for aviation fuel, which accounts for 30-40 per cent of an airline’s operational costs and accord it ‘declared goods’ status. The move will bring down sales tax to 4 per cent, which is currently 24 per cent in some states. The Ministry will also ask government servants to fly only AI on official trips.

It was also decided at the meeting that the Petroleum and Natural Gas Ministry will intervene with oil marketing companies to provide a six-month credit line to the carrier.

AI will leverage its properties and other real estate assets to generate additional revenues and bring in cash, said an official. “It will also undertake rent-reduction,” he added.



Recession easing, recovery fragile: IMF


Recession easing, recovery fragile: IMF
Trade ministers gear up for Pittsburgh G20
US economy has ‘no bounce’: Buffett
Most economies in deeper slump: World Bank
Washington: The global economy is slowly starting to pull out of its deepest recession since World War Two but a recovery will be sluggish and policies need to remain supportive, the International Monetary Fund said on Wednesday.

In an update of its World Economic Outlook, the IMF said the global economy is likely to contract 1.4 per cent this year, a touch steeper than the 1.3 per cent decline it projected in April.

However, it now sees world growth strengthening to 2.5 per cent in 2010, compared to an April forecast of 1.9 per cent.

IMF chief economist Olivier Blanchard said forces dampening economic activity were easing in intensity but those pushing it up were still weak despite heavy government spending and central bank lending.

"This leads us to predict that while the world economy is still in recession, the recovery is coming but it is likely to be a weak recovery," Blanchard told a news conference.

He emphasized that confidence in the financial sector would not return until toxic debts were removed from banks' balance sheets and frail institutions recapitalized.

The IMF said conditions had improved more than expected as governments have pumped huge amounts of money into their economies and financial institutions, and warned against withdrawing fiscal and monetary support prematurely.

"Although exiting now would be premature, I think it's fundamental that we devise credible plans that map where we're going in the medium-term and how we're going to get there," said Jose Vinals, director of the IMF's Monetary and Capital Markets Department.

Vinals said addressing high public debt levels should be part of exit strategy plans, warning that sovereign debt markets may be destabilized if the burden on public sector balance sheets begins to be perceived as unsustainable.

A summit of Group of Eight leaders from industrial countries on Wednesday committed to withdrawing stimulus spending only when a recovery looked secure.

"All were of the view that the crisis is a long way from being over. With luck, we have reached the bottom," German Chancellor Angela Merkel told reporters at the G8 in the Italian town of L'Aquila.

BELOW-TREND GROWTH AHEAD

The IMF said while the world's advanced economies are expected to recover modestly next year, growth will remain below potential until later in 2010, suggesting unemployment will rise further.

It said the US economy will contract 2.6 per cent this year, slightly less than it thought in April, with growth resuming in 2010, albeit at a mere 0.8 per cent.
Source : http://www.financialexpress.com

World Stock Exchanges

A stock market is a public market for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.
The size of the world stock market was estimated at about $36.6 trillion US at the beginning of October 2008. [1] The total world derivatives market has been estimated at about $791 trillion face or nominal value, [2] 11 times the size of the entire world economy. [3] The value of the derivatives market, because it is stated in terms of notional values, cannot be directly compared to a stock or a fixed income security, which traditionally refers to an actual value. Moreover, the vast majority of derivatives 'cancel' each other out (i.e., a derivative 'bet' on an event occurring is offset by a comparable derivative 'bet' on the event not occurring.). Many such relatively illiquid securities are valued as marked to model, rather than an actual market price.
The stocks are listed and traded on stock exchanges which are entities of a corporation or mutual organization specialized in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together. The stock market in the United States includes the trading of all securities listed on the NYSE Euronext, the NASDAQ, the Amex, as well as on the many regional exchanges, e.g. OTCBB and Pink Sheets. European examples of stock exchanges include the London Stock

Participants in the stock market range from small individual stock investors to large hedge fund traders, who can be based anywhere. Their orders usually end up with a professional at a stock exchange, who executes the order.
Some exchanges are physical locations where transactions are carried out on a trading floor, by a method known as open outcry. This type of auction is used in stock exchanges and commodity exchanges where traders may enter "verbal" bids and offers simultaneously. The other type of stock exchange is a virtual kind, composed of a network of computers where trades are made electronically via traders.
Actual trades are based on an auction market model where a potential buyer bids a specific price for a stock and a potential seller asks a specific price for the stock. (Buying or selling at market means you will accept any ask price or bid price for the stock, respectively.) When the bid and ask prices match, a sale takes place on a first come first served basis if there are multiple bidders or askers at a given price.
The purpose of a stock exchange is to facilitate the exchange of securities between buyers and sellers, thus providing a marketplace (virtual or real). The exchanges provide real-time trading information on the listed securities, facilitating price discovery.

New York Stock Exchange.

The New York Stock Exchange is a physical exchange, also referred to as a listed exchange — only stocks listed with the exchange may be traded. Orders enter by way of exchange members and flow down to a floor broker, who goes to the floor trading post specialist for that stock to trade the order. The specialist's job is to match buy and sell orders using open outcry. If a spread exists, no trade immediately takes place--in this case the specialist should use his/her own resources (money or stock) to close the difference after his/her judged time. Once a trade has been made the details are reported on the "tape" and sent back to the brokerage firm, which then notifies the investor who placed the order. Although there is a significant amount of human contact in this process, computers play an important role, especially for so-called "program trading".
The NASDAQ is a virtual listed exchange, where all of the trading is done over a computer network. The process is similar to the New York Stock Exchange. However, buyers and sellers are electronically matched. One or more NASDAQ market makers will always provide a bid and ask price at which they will always purchase or sell 'their' stock. [1].
The Paris Bourse, now part of Euronext, is an order-driven, electronic stock exchange. It was automated in the late 1980s. Prior to the 1980s, it consisted of an open outcry exchange. Stockbrokers met on the trading floor or the Palais Brongniart. In 1986, the CATS trading system was introduced, and the order matching process was fully automated.
From time to time, active trading (especially in large blocks of securities) have moved away from the 'active' exchanges. Securities firms, led by UBS AG, Goldman Sachs Group Inc. and Credit Suisse Group, already steer 12 percent of U.S. security trades away from the exchanges to their internal systems. That share probably will increase to 18 percent by 2010 as more investment banks bypass the NYSE and NASDAQ and pair buyers and sellers of securities themselves, according to data compiled by Boston-based Aite Group LLC, a brokerage-industry consultant[citation needed].
Now that computers have eliminated the need for trading floors like the Big Board's, the balance of power in equity markets is shifting. By bringing more orders in-house, where clients can move big blocks of stock anonymously, brokers pay the exchanges less in fees and capture a bigger share of the $11 billion a year that institutional investors pay in trading commissions[citation needed].
[edit] Market participants
A few decades ago, worldwide, buyers and sellers were individual investors, such as wealthy businessmen, with long family histories (and emotional ties) to particular corporations. Over time, markets have become more "institutionalized"; buyers and sellers are largely institutions (e.g., pension funds, insurance companies, mutual funds, index funds, exchange-traded funds, hedge funds, investor groups, banks and various other financial institutions). The rise of the institutional investor has brought with it some improvements in market operations. Thus, the government was responsible for "fixed" (and exorbitant) fees being markedly reduced for the 'small' investor, but only after the large institutions had managed to break the brokers' solid front on fees. (They then went to 'negotiated' fees, but only for large institutions.[citation needed])
However, corporate governance (at least in the West) has been very much adversely affected by the rise of (largely 'absentee') institutional 'owners'
History

This section does not cite any references or sources. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (March 2009)
Historian Fernand Braudel suggests that in Cairo in the 11th century, Muslim and Jewish merchants had already set up every form of trade association and had knowledge of many methods of financial dealings, disproving the belief that these were originally invented later by Italians. In 12th century France the courratiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. Because these men also traded with debts, they could be called the first brokers. A common misbelief is that in late 13th century Bruges commodity traders gathered inside the house of a man called Van der Beurze, and in 1309 they became the "Brugse Beurse", institutionalizing what had been, until then, an informal meeting, but actually, the family Van der Beurze had a building in Antwerp where those gatherings occurred [2]; the Van der Beurze had Antwerp, as most of the merchants of that period, as their primary place for trading. The idea quickly spread around Flanders and neighboring counties and "Beurzen" soon opened in Ghent and Amsterdam.
In the middle of the 13th century, Venetian bankers began to trade in government securities. In 1351 the Venetian government outlawed spreading rumors intended to lower the price of government funds. Bankers in Pisa, Verona, Genoa and Florence also began trading in government securities during the 14th century. This was only possible because these were independent city states not ruled by a duke but a council of influential citizens. The Dutch later started joint stock companies, which let shareholders invest in business ventures and get a share of their profits - or losses. In 1602, the Dutch East India Company issued the first share on the Amsterdam Stock Exchange. It was the first company to issue stocks and bonds.
The Amsterdam Stock Exchange (or Amsterdam Beurs) is also said to have been the first stock exchange to introduce continuous trade in the early 17th century. The Dutch "pioneered short selling, option trading, debt-equity swaps, merchant banking, unit trusts and other speculative instruments, much as we know them" (Murray Sayle, "Japan Goes Dutch", London Review of Books XXIII.7, April 5, 2001). There are now stock markets in virtually every developed and most developing economies, with the world's biggest markets being in the United States, UK, Japan, China, Canada, Germany, and France.
Importance of stock market
[edit] Function and purpose
The stock market is one of the most important sources for companies to raise money. This allows businesses to be publicly traded, or raise additional capital for expansion by selling shares of ownership of the company in a public market. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate.
History has shown that the price of shares and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood. An economy where the stock market is on the rise is considered to be an up and coming economy. In fact, the stock market is often considered the primary indicator of a country's economic strength and development. Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. Therefore, central banks tend to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system functions. Financial stability is the raison d'être of central banks.
Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction.
The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. In this way the financial system contributes to increased prosperity.
[edit] Relation of the stock market to the modern financial system
The financial system in most western countries has undergone a remarkable transformation. One feature of this development is disintermediation. A portion of the funds involved in saving and financing flows directly to the financial markets instead of being routed via the traditional bank lending and deposit operations. The general public's heightened interest in investing in the stock market, either directly or through mutual funds, has been an important component of this process. Statistics show that in recent decades shares have made up an increasingly large proportion of households' financial assets in many countries. In the 1970s, in Sweden, deposit accounts and other very liquid assets with little risk made up almost 60 percent of households' financial wealth, compared to less than 20 percent in the 2000s. The major part of this adjustment in financial portfolios has gone directly to shares but a good deal now takes the form of various kinds of institutional investment for groups of individuals, e.g., pension funds, mutual funds, hedge funds, insurance investment of premiums, etc. The trend towards forms of saving with a higher risk has been accentuated by new rules for most funds and insurance, permitting a higher proportion of shares to bonds. Similar tendencies are to be found in other industrialized countries. In all developed economic systems, such as the European Union, the United States, Japan and other developed nations, the trend has been the same: saving has moved away from traditional (government insured) bank deposits to more risky securities of one sort or another.
[edit] The stock market, individual investors, and financial risk
Riskier long-term saving requires that an individual possess the ability to manage the associated increased risks. Stock prices fluctuate widely, in marked contrast to the stability of (government insured) bank deposits or bonds. This is something that could affect not only the individual investor or household, but also the economy on a large scale. The following deals with some of the risks of the financial sector in general and the stock market in particular. This is certainly more important now that so many newcomers have entered the stock market, or have acquired other 'risky' investments (such as 'investment' property, i.e., real estate and collectables).
With each passing year, the noise level in the stock market rises. Television commentators, financial writers, analysts, and market strategists are all overtaking each other to get investors' attention. At the same time, individual investors, immersed in chat rooms and message boards, are exchanging questionable and often misleading tips. Yet, despite all this available information, investors find it increasingly difficult to profit. Stock prices skyrocket with little reason, then plummet just as quickly, and people who have turned to investing for their children's education and their own retirement become frightened. Sometimes there appears to be no rhyme or reason to the market, only folly.
This is a quote from the preface to a published biography about the long-term value-oriented stock investor Warren Buffett.[4] Buffett began his career with $100, and $105,000 from seven limited partners consisting of Buffett's family and friends. Over the years he has built himself a multi-billion-dollar fortune. The quote illustrates some of what has been happening in the stock market during the end of the 20th century and the beginning of the 21st century.
[edit] The behavior of the stock market

NASDAQ in Times Square, New York City.

From experience we know that investors may 'temporarily' move financial prices away from their long term aggregate price 'trends'. (Positive or up trends are referred to as bull markets; negative or down trends are referred to as bear markets.) Over-reactions may occur—so that excessive optimism (euphoria) may drive prices unduly high or excessive pessimism may drive prices unduly low. New theoretical and empirical arguments have since been put forward against the notion that financial markets are 'generally' efficient (i.e., in the sense that stock prices in the aggregate tend to follow a Gaussian distribution).
According to the efficient market hypothesis (EMH), only changes in fundamental factors, such as the outlook for margins, profits or dividends, ought to affect share prices beyond the short term, where random 'noise' in the system may prevail. (But this largely theoretic academic viewpoint—known as 'hard' EMH—also predicts that little or no trading should take place, contrary to fact, since prices are already at or near equilibrium, having priced in all public knowledge.) The 'hard' efficient-market hypothesis is sorely tested by such events as the stock market crash in 1987, when the Dow Jones index plummeted 22.6 percent—the largest-ever one-day fall in the United States. This event demonstrated that share prices can fall dramatically even though, to this day, it is impossible to fix a generally agreed upon definite cause: a thorough search failed to detect any 'reasonable' development that might have accounted for the crash. (But note that such events are predicted to occur strictly by chance , although very rarely.) It seems also to be the case more generally that many price movements (beyond that which are predicted to occur 'randomly') are not occasioned by new information; a study of the fifty largest one-day share price movements in the United States in the post-war period seems to confirm this.[5]
However, a 'soft' EMH has emerged which does not require that prices remain at or near equilibrium, but only that market participants not be able to systematically profit from any momentary market 'inefficiencies'. Moreover, while EMH predicts that all price movement (in the absence of change in fundamental information) is random (i.e., non-trending), many studies have shown a marked tendency for the stock market to trend over time periods of weeks or longer. Various explanations for such large and apparently non-random price movements have been promulgated. For instance, some research has shown that changes in estimated risk, and the use of certain strategies, such as stop-loss limits and Value at Risk limits, theoretically could cause financial markets to overreact. But the best explanation seems to be that the distribution of stock market prices is non-Gaussian (in which case EMH, in any of its current forms, would not be strictly applicable). [6] [7]
Other research has shown that psychological factors may result in exaggerated (statistically anomalous) stock price movements (contrary to EMH which assumes such behaviors 'cancel out'). Psychological research has demonstrated that people are predisposed to 'seeing' patterns, and often will perceive a pattern in what is, in fact, just noise. (Something like seeing familiar shapes in clouds or ink blots.) In the present context this means that a succession of good news items about a company may lead investors to overreact positively (unjustifiably driving the price up). A period of good returns also boosts the investor's self-confidence, reducing his (psychological) risk threshold.[8]
Another phenomenon—also from psychology—that works against an objective assessment is group thinking. As social animals, it is not easy to stick to an opinion that differs markedly from that of a majority of the group. An example with which one may be familiar is the reluctance to enter a restaurant that is empty; people generally prefer to have their opinion validated by those of others in the group.
In one paper the authors draw an analogy with gambling.[9] In normal times the market behaves like a game of roulette; the probabilities are known and largely independent of the investment decisions of the different players. In times of market stress, however, the game becomes more like poker (herding behavior takes over). The players now must give heavy weight to the psychology of other investors and how they are likely to react psychologically.
The stock market, as any other business, is quite unforgiving of amateurs. Inexperienced investors rarely get the assistance and support they need. In the period running up to the 1987 crash, less than 1 percent of the analyst's recommendations had been to sell (and even during the 2000 - 2002 bear market, the average did not rise above 5%). In the run up to 2000, the media amplified the general euphoria, with reports of rapidly rising share prices and the notion that large sums of money could be quickly earned in the so-called new economy stock market. (And later amplified the gloom which descended during the 2000 - 2002 bear market, so that by summer of 2002, predictions of a DOW average below 5000 were quite common.)

Irrational behavior

Sometimes the market seems to react irrationally to economic or financial news, even if that news is likely to have no real effect on the technical value of securities itself. But this may be more apparent than real, since often such news has been anticipated, and a counterreaction may occur if the news is better (or worse) than expected. Therefore, the stock market may be swayed in either direction by press releases, rumors, euphoria and mass panic; but generally only briefly, as more experienced investors (especially the hedge funds) quickly rally to take advantage of even the slightest, momentary hysteria.
Over the short-term, stocks and other securities can be battered or buoyed by any number of fast market-changing events, making the stock market behavior difficult to predict. Emotions can drive prices up and down, people are generally not as rational as they think, and the reasons for buying and selling are generally obscure. Behaviorists argue that investors often behave 'irrationally' when making investment decisions thereby incorrectly pricing securities, which causes market inefficiencies, which, in turn, are opportunities to make money[10]. However, the whole notion of EMH is that these non-rational reactions to information cancel out, leaving the prices of stocks rationally determined.
The Dow Jones Industrial Average biggest gain in one day was 936.42 points or 11 percent, this occurred on October 13, 2008.[11]

Crashes

The examples and perspective in this section may not represent a worldwide view of the subject. Please improve this article or discuss the issue on the talk page. (March 2009)


Robert Shiller's plot of the S&P Composite Real Price Index, Earnings, Dividends, and Interest Rates, from Irrational Exuberance, 2d ed.[12] In the preface to this edition, Shiller warns, "The stock market has not come down to historical levels: the price-earnings ratio as I define it in this book is still, at this writing [2005], in the mid-20s, far higher than the historical average. . . . People still place too much confidence in the markets and have too strong a belief that paying attention to the gyrations in their investments will someday make them rich, and so they do not make conservative preparations for possible bad outcomes."


Price-Earnings ratios as a predictor of twenty-year returns based upon the plot by Robert Shiller (Figure 10.1,[12] source). The horizontal axis shows the real price-earnings ratio of the S&P Composite Stock Price Index as computed in Irrational Exuberance (inflation adjusted price divided by the prior ten-year mean of inflation-adjusted earnings). The vertical axis shows the geometric average real annual return on investing in the S&P Composite Stock Price Index, reinvesting dividends, and selling twenty years later. Data from different twenty year periods is color-coded as shown in the key. See also ten-year returns. Shiller states that this plot "confirms that long-term investors—investors who commit their money to an investment for ten full years—did do well when prices were low relative to earnings at the beginning of the ten years. Long-term investors would be well advised, individually, to lower their exposure to the stock market when it is high, as it has been recently, and get into the market when it is low."[12]
Main article: Stock market crash
A stock market crash is often defined as a sharp dip in share prices of equities listed on the stock exchanges. In parallel with various economic factors, a reason for stock market crashes is also due to panic. Often, stock market crashes end speculative economic bubbles.
There have been famous stock market crashes that have ended in the loss of billions of dollars and wealth destruction on a massive scale. An increasing number of people are involved in the stock market, especially since the social security and retirement plans are being increasingly privatized and linked to stocks and bonds and other elements of the market. There have been a number of famous stock market crashes like the Wall Street Crash of 1929, the stock market crash of 1973–4, the Black Monday of 1987, the Dot-com bubble of 2000, and the Stock Market Crash of 2008.
One of the most famous stock market crashes started October 24, 1929 on Black Thursday. The Dow Jones Industrial lost 50% during this stock market crash. It was the beginning of the Great Depression. Another famous crash took place on October 19, 1987 – Black Monday. On Black Monday itself, the Dow Jones fell by 22.6% after completing a 5 year continuous rise in share prices. This event not only shook the USA, but quickly spread across the world. Thus, by the end of October, stock exchanges in Australia lost 41.8%, in Canada lost 22.5%, in Hong Kong lost 45.8%, and in Great Britain lost 26.4%. The names “Black Monday” and “Black Tuesday” are also used for October 28-29, 1929, which followed Terrible Thursday--the starting day of the stock market crash in 1929. The crash in 1987 raised some puzzles-–main news and events did not predict the catastrophe and visible reasons for the collapse were not identified. This event raised questions about many important assumptions of modern economics, namely, the theory of rational human conduct, the theory of market equilibrium and the hypothesis of market efficiency. For some time after the crash, trading in stock exchanges worldwide was halted, since the exchange computers did not perform well owing to enormous quantity of trades being received at one time. This halt in trading allowed the Federal Reserve system and central banks of other countries to take measures to control the spreading of worldwide financial crisis. In the United States the SEC introduced several new measures of control into the stock market in an attempt to prevent a re-occurrence of the events of Black Monday. Computer systems were upgraded in the stock exchanges to handle larger trading volumes in a more accurate and controlled manner. The SEC modified the margin requirements in an attempt to lower the volatility of common stocks, stock options and the futures market. The New York Stock Exchange and the Chicago Mercantile Exchange introduced the concept of a circuit breaker. The circuit breaker halts trading if the Dow declines a prescribed number of points for a prescribed amount of time.
• New York Stock Exchange (NYSE) circuit breakers[13]
% drop time of drop close trading for
10% drop before 2PM one hour halt
10% drop 2PM - 2:30PM half-hour halt
10% drop after 2:30PM market stays open
20% drop before 1PM halt for two hours
20% drop 1PM - 2PM halt for one hour
20% drop after 2PM close for the day
30% drop any time during day close for the day
[edit] Stock market index
Main article: Stock market index
The movements of the prices in a market or section of a market are captured in price indices called stock market indices, of which there are many, e.g., the S&P, the FTSE and the Euronext indices. Such indices are usually market capitalization weighted, with the weights reflecting the contribution of the stock to the index. The constituents of the index are reviewed frequently to include/exclude stocks in order to reflect the changing business environment.
[edit] Derivative instruments
Main article: Derivative (finance)
Financial innovation has brought many new financial instruments whose pay-offs or values depend on the prices of stocks. Some examples are exchange-traded funds (ETFs), stock index and stock options, equity swaps, single-stock futures, and stock index futures. These last two may be traded on futures exchanges (which are distinct from stock exchanges—their history traces back to commodities futures exchanges), or traded over-the-counter. As all of these products are only derived from stocks, they are sometimes considered to be traded in a (hypothetical) derivatives market, rather than the (hypothetical) stock market.
[edit] Leveraged strategies
Stock that a trader does not actually own may be traded using short selling; margin buying may be used to purchase stock with borrowed funds; or, derivatives may be used to control large blocks of stocks for a much smaller amount of money than would be required by outright purchase or sale.
[edit] Short selling
Main article: Short selling
In short selling, the trader borrows stock (usually from his brokerage which holds its clients' shares or its own shares on account to lend to short sellers) then sells it on the market, hoping for the price to fall. The trader eventually buys back the stock, making money if the price fell in the meantime or losing money if it rose. Exiting a short position by buying back the stock is called "covering a short position." This strategy may also be used by unscrupulous traders to artificially lower the price of a stock. Hence most markets either prevent short selling or place restrictions on when and how a short sale can occur. The practice of naked shorting is illegal in most (but not all) stock markets.
[edit] Margin buying
Main article: margin buying
In margin buying, the trader borrows money (at interest) to buy a stock and hopes for it to rise. Most industrialized countries have regulations that require that if the borrowing is based on collateral from other stocks the trader owns outright, it can be a maximum of a certain percentage of those other stocks' value. In the United States, the margin requirements have been 50% for many years (that is, if you want to make a $1000 investment, you need to put up $500, and there is often a maintenance margin below the $500). A margin call is made if the total value of the investor's account cannot support the loss of the trade. (Upon a decline in the value of the margined securities additional funds may be required to maintain the account's equity, and with or without notice the margined security or any others within the account may be sold by the brokerage to protect its loan position. The investor is responsible for any shortfall following such forced sales.) Regulation of margin requirements (by the Federal Reserve) was implemented after the Crash of 1929. Before that, speculators typically only needed to put up as little as 10 percent (or even less) of the total investment represented by the stocks purchased. Other rules may include the prohibition of free-riding: putting in an order to buy stocks without paying initially (there is normally a three-day grace period for delivery of the stock), but then selling them (before the three-days are up) and using part of the proceeds to make the original payment (assuming that the value of the stocks has not declined in the interim).
[edit] New issuance
Main article: Thomson Financial league tables
Global issuance of equity and equity-related instruments totaled $505 billion in 2004, a 29.8% increase over the $389 billion raised in 2003. Initial public offerings (IPOs) by US issuers increased 221% with 233 offerings that raised $45 billion, and IPOs in Europe, Middle East and Africa (EMEA) increased by 333%, from $ 9 billion to $39 billion.
[edit] Investment strategies
Main article: Stock valuation
One of the many things people always want to know about the stock market is, "How do I make money investing?" There are many different approaches; two basic methods are classified as either fundamental analysis or technical analysis. Fundamental analysis refers to analyzing companies by their financial statements found in SEC Filings, business trends, general economic conditions, etc. Technical analysis studies price actions in markets through the use of charts and quantitative techniques to attempt to forecast price trends regardless of the company's financial prospects. One example of a technical strategy is the Trend following method, used by John W. Henry and Ed Seykota, which uses price patterns, utilizes strict money management and is also rooted in risk control and diversification.
Additionally, many choose to invest via the index method. In this method, one holds a weighted or unweighted portfolio consisting of the entire stock market or some segment of the stock market (such as the S&P 500 or Wilshire 5000). The principal aim of this strategy is to maximize diversification, minimize taxes from too frequent trading, and ride the general trend of the stock market (which, in the U.S., has averaged nearly 10%/year, compounded annually, since World War II).
[edit] Taxation
Main article: Capital gains tax
According to much national or state legislation, a large array of fiscal obligations are taxed for capital gains. Taxes are charged by the state over the transactions, dividends and capital gains on the stock market, in particular in the stock exchanges. However, these fiscal obligations may vary from jurisdiction to jurisdiction because, among other reasons, it could be assumed that taxation is already incorporated into the stock price through the different taxes companies pay to the state, or that tax free stock market operations are useful to boost economic growth.







INDIAN STOCK MARKET

Stock Exchanges are an organised marketplace, either corporation or mutual organisation, where members of the organisation gather to trade company stocks and other securities. The members may act either as agents for their customers, or as principals for their own accounts.

Stock exchanges also facilitate for the issue and redemption of securities and other financial instruments including the payment of income
and dividends. The record keeping is central but trade is linked to such physical place because modern markets are computerised. The trade on an exchange is only by members and stock broker do have a seat on the exchange.
List of Stock Exchanges In India


• Bombay Stock Exchange
• National Stock Exchange
• Regional Stock Exchanges
o Ahmedabad Stock Exchange
o Bangalore Stock Exchange
o Bhubaneshwar Stock Exchange
o Calcutta Stock Exchange
o Cochin Stock Exchange
o Coimbatore Stock Exchange
o Delhi Stock Exchange
o Guwahati Stock Exchange
o Hyderabad Stock Exchange
o Jaipur Stock Exchange
o Ludhiana Stock Exchange
o Madhya Pradesh Stock Exchange
o Madras Stock Exchange
o Magadh Stock Exchange
o Mangalore Stock Exchange
o Meerut Stock Exchange
o OTC Exchange Of India
o Pune Stock Exchange
o Saurashtra Kutch Stock Exchange
o Uttar Pradesh Stock Exchange
o Vadodara Stock Exchange
History of Stock Exchanges In India:
In 1860, the exchange flourished with 60 brokers. In fact the 'Share Mania' in India began when the American Civil War broke and the cotton supply from the US to Europe stopped. Further the brokers increased to 250.

At the end of the war in 1874, the market found a place in a street (now called Dalal Street). In 1887, "Native Share and Stock Brokers' Association" was established. In 1895, the exchange acquired a premise in the street which was inaugurated in 1899.