Archives: Volume 1 • Number 5 • December 2007-January 2008

Calendar Anomalies in Indian Stock Market

Till the late seventies, empirical studies bolstered the view that capital market are informational efficient. Academician and researcher on the concept of informational efficiency of capital markets developed various theoretical security valuation models. However the late seventies and eighties produced the evidences questioning the validity of this theory and illuminated the various anomalies related to the capital market efficiency. These studies demonstrated the possible trading strategies, seasonal anomalies and persistence of technical analysis yielding abnormal returns using the historical data and publicly available information. Studies on the Indian stock market’s calendar anomalies, especially in the recent bull phase of market due to growing economy, wider participation foreign institutional investors and retail investors, are very few. In an attempt to fill this gap, this study explores the Indian stock market’s informational efficiency in its weak form in the context of calendar anomalies especially in respect of the day of week effect and month of the year effect. In this attempt to find seasonality in Indian stock market the study used the daily closing value of BSE Sensex and BSE 100 indices for the period during January 1996 to December 2006. The study is bifurcated into two sub-periods. One important thing that distinguished this study from earlier studies is that it incorporated both the parametric and non-parametric approach to check any seasonal pattern in common stock returns. The findings regarding the day of the week reported no significant differences in sample distribution of daily common stock returns during the whole study period and second sub-period (2002-2006). It is curious to note the empirical findings reported the day of the week effect during the first study period (1996-2001). Regarding the month of the year effect the study has not reported any anomaly regarding the average monthly return during the whole study period and first sub-period (1996-2001). In the second sub-period (2002-2006) the study exhibited evidences in favor of alternative hypothesis that the average monthly returns are not equal. The study adds to existing market efficiency literature that both the parametric and non-parametric approaches yield similar results regarding examination of seasonality in common stock return. 

Dr.Kapil Choudhary
Lecturer
Department of Management Studies
JCDM College of Engineering
Sirsa, Haryana

The term ‘leverage’ may be defined as the percent of change in one variable by the percent of change in some other variable or variables. In finance, the term leverage is used to describe the firm’s ability to use fixed cost assets or funds; the former is popularly known as ‘operating leverage’ and the latter is known as ‘financial leverage’. Greater of these leverages means higher the returns to the equity shareholders. This paper focuses on the impact of operating and financial leverages on the profitability of Coramandal Fertilisers Ltd, a leading fertiliser manufacturing firm from South India.

C.T.Sam Luther
Head
Department of Management Studies
Nesamony Memorial Christian College
Kanyakumari, Tamil Nadu

Development of Financial Engineering:An Economics Perspective

This article deals with a broad array of topics that fit together through certain logic that we generally call Financial Engineering. The approach uses a combination of historical anecdotes, elementary discussion on mathematics for Finance and Economics and real world examples. This article have attempted to connect the three distinct but interdependent fields of study, namely, Economics, Econometrics and Financial Engineering, their conception and their use in economic planning. It combines technical and conceptual advances from various disciplines to create a broad interdisciplinary body of knowledge, ready to meet the challenges of a rapidly growing market and an exciting future. 

Dr.Ranjan Chaudhuri
Assistant Professor(Marketing)
National Institute of Industrial Engineering
Mumbai

A Study on Investor's Expected Rate of Return on Their Investments with Special Reference to the Nilgiris District

Investments have become a basic necessity for everyone. In our country there is rapid growth in investment. More number of investors is investing their funds in different types of investment opportunities. Investing wisely is a function of investor’s specific needs and goals. Each investor has different objectives that need to be met depending on age, income and attitude towards risk. Investors have to work out with their investment profile to determine which investments are right for them and should consider important factors such as a personal status, plans and constraints. Interest rates changes also after the relative attractiveness of financial assets like shares, bonds and other fixed interest investments. Lower interest rates generally tend to cause a shift of ingestible funds from bonds, bank and company deposits to equity shares and vice versa. The impact of any change in interest rates affects the way companies finance their operations. When interest rates are high, companies prefer the raise funds through issue of equity shares rather than bonds and high cost bank loans. But in case of falling interest, bank loans become more attractive as a source of fiancé than equity. So this means that lower interest rates are bad for the primary market and goods for the secondary markets. In this context, it was considered very important to know the rate of return expected by investors.

C.Krishnamoorthi
Lecturer
PG Department of Commerce
Providence College for Women
Coonoor, Tamil Nadu

Foreign Institutional Investors in India

Foreign institutional investors are likely to have similar characteristics to domestic institutional investors. Nonetheless, there are policy relevant implications of the choice between domestic and foreign institutional investors. Foreign institutional investors may be able to tap larger amounts of capital than domestic institutional investors. Involving foreign investors may also insure world standards in information disclosure and managerial accountability. On the other hand, involving foreign investors potentially will allow foreigners to reap the benefits from an appreciation in the value of the enterprises. Such a concern is particularly relevant if, for some economically sensible reason, the offering has to be made at a "low" price. Foreign institutional investors (FIIs) were net sellers from November 1997 through January 1998. The outflow, prompted by the economic and currency crisis in Asia and some volatility in the Indian rupee, was modest compared to the roughly $ 9 billion which has been invested in India by FIIs since 1992.

Dr.P.Chellaswamy
Lecturer
Department of Commerce
Bharathiar University
Coimbatore,Tamil Nadu

J.Udhayakumar
M.Phil Scholar
Department of Commerce
Bharathiar University
Coimbatore,Tamil Nadu