The purpose of this project is to teach school students the values of investing and
utilising the stock market. This project also teaches important lessons about the
economy, mathematics and financial responsibility.
The basis of this project is to learn about the stock market while investing a specified
amount of fake money in certain stocks. Students then study the results and buy and sell
as they see fit.
This project will also guide the students and provide them with the supplies necessary to
successfully monitor stock market trends and will teach students how to calculate profit
and loss on stock.
The project work will enable the students to:
understand the topics like sources of business finance and capital market
understand the concepts used in stock exchange
inculcate the habit of watching business channels, reading business
journals/newspapers and seeking information from their elders.
The students are expected to:
a) Develop a brief report on History of Stock Exchanges in India. (your country)
b) Prepare a list of at least 25 companies listed on a Stock Exchange.
c) To make an imaginary portfolio totalling a sum of Rs. 50,000 equally in any of the 5
companies of their choice listed above over a period of twenty working days.
The students may be required to report the prices of the stocks on daily basis and
present it diagrammatically on the graph paper.
They will understand the weekly holidays and the holidays under the
Negotiable Instruments Act.
They will also come across with terms like closing prices, opening prices, etc.
During this period of recording students are supposed to distinctively record
the daily and starting and closing prices of the week other days under the
negotiable instrument act so that they acquire knowledge about closing and
opening prices.
The students may conclude by identifying the causes in the fluctuations of
prices. Normally it would be related to the front page news of the a business
journal, for example,
Change of seasons.
1.Festivals.
2.Spread of epidemic.
3.Strikes and accidents
4.Natural and human disasters.
5.Political environment.
6.Lack of faith in the government policies.
7.Impact of changes in government policies for specific industry.
8.International events.
9.Contract and treaties at the international scene.
10.Relations with the neighbouring countries.
11.Crisis in developed countries, etc.
The students are expected to find the value of their investments and accordingly
rearrange their portfolio. The project work should cover the following aspects;
1. Graphical presentation of the share prices of different companies on different dates.
2. Change in market value of shares due to change of seasons, festivals, natural and
human disasters.
3. Change in market value of shares due to change in political environment/ policies of
various countries/crisis in developed countries or any other reasons
4. Identify the top ten companies out of the 25 selected on the basis of their market
value of shares.
It does not matter if they have made profits or losses
Stock Exchanges
Answers
1. History of Stock Exchanges in India
* The history of stock exchanges in India is rich and complex, reflecting the country’s economic development and regulatory evolution over time. Here’s an overview:
(A)Bombay Stock Exchange (BSE):
Established in 1875, the Bombay Stock Exchange is one of the oldest stock exchanges in Asia.
Initially, the BSE began as the Native Share and Stock Brokers Association, and it operated under a banyan tree in Mumbai.
Over the years, the BSE grew in size and importance, becoming a crucial hub for trading stocks, bonds, and other securities.
It played a significant role in financing India’s industrialization and economic growth, particularly during the post-independence period.
(B)National Stock Exchange (NSE):
The National Stock Exchange was established in 1992 to modernize and streamline India’s capital markets.
It introduced electronic trading systems and other technological innovations, revolutionizing stock market operations in the country.
The NSE introduced index-based trading, with the flagship index being the Nifty 50, which tracks the performance of fifty large-cap stocks listed on the exchange.
The NSE quickly emerged as a formidable competitor to the BSE, offering greater transparency, efficiency, and liquidity to investors.
(C)Calcutta Stock Exchange (CSE):
Founded in 1908, the Calcutta Stock Exchange is one of the oldest stock exchanges in India.
It played a vital role in financing colonial-era industries in eastern India, particularly in sectors such as jute and tea.
However, over time, its significance diminished relative to the BSE and NSE, and it faced challenges related to technology, governance, and regulatory compliance.
(D)Other Regional Exchanges:
In addition to the BSE, NSE, and CSE, India has several other regional stock exchanges, such as the Madras Stock Exchange, Ahmedabad Stock Exchange, and Delhi Stock Exchange.
These exchanges catered to local businesses and investors, but many of them faced declining volumes and regulatory scrutiny in the face of competition from larger exchanges.
(E)Regulatory Framework:
The Securities and Exchange Board of India (SEBI) is the primary regulatory authority overseeing the functioning of stock exchanges and capital markets in India.
SEBI was established in 1988 to promote the development and regulation of securities markets and to protect the interests of investors.
(F)Recent Developments:
In recent years, India’s stock exchanges have witnessed significant growth in trading volumes and market capitalization.
The government and regulatory authorities have introduced various reforms to enhance transparency, governance, and investor protection in the capital markets.
India’s stock exchanges play a crucial role in mobilizing capital for businesses, facilitating investment, and contributing to the country’s economic growth.
Overall, the history of stock exchanges in India reflects the country’s journey from a colonial economy to a dynamic and rapidly growing market-oriented economy. These exchanges have played a vital role in channeling savings into productive investments and supporting India’s economic development aspirations
2.List of 25 Companies Listed on a Stock Exchange
Certainly! Here’s a list of 25 companies listed on the National Stock Exchange (NSE) of India. These companies represent a diverse range of sectors, providing students with a broad understanding of the Indian stock market:
1.Reliance Industries Limited (RIL) – Conglomerate (Energy, Petrochemicals, Telecommunications)
2.Tata Consultancy Services (TCS) – Information Technology Services
3.HDFC Bank Limited – Banking and Financial Services
4.Infosys Limited – Information Technology Services
5.Hindustan Unilever Limited (HUL) – Consumer Goods (FMCG)
6.ICICI Bank Limited – Banking and Financial Services
7.Housing Development Finance Corporation Limited (HDFC) – Housing Finance
8.Bharti Airtel Limited – Telecommunications
9.Kotak Mahindra Bank Limited – Banking and Financial Services
10.Wipro Limited – Information Technology Services
11.ITC Limited – Consumer Goods (FMCG, Tobacco)
12.Axis Bank Limited – Banking and Financial Services
13.Asian Paints Limited – Paints and Coatings
14.Maruti Suzuki India Limited – Automobiles
15.State Bank of India (SBI) – Banking and Financial Services
16.Nestle India Limited – Consumer Goods (Food and Beverages)
17.IndusInd Bank Limited – Banking and Financial Services
18.Tech Mahindra Limited – Information Technology Services
19.UltraTech Cement Limited – Cement and Building Materials
20.Bajaj Finance Limited – Financial Services
21.Power Grid Corporation of India Limited – Power Transmission and Distribution
22.Dr. Reddy’s Laboratories Limited – Pharmaceuticals
23.HCL Technologies Limited – Information Technology Services
24.Tata Steel Limited – Steel and Metals
25.Mahindra & Mahindra Limited (M&M) – Automobiles and Tractors
This list includes companies from various sectors such as banking, information technology, consumer goods, telecommunications, automobiles, and more. It provides students with a diverse set of options to construct their imaginary portfolios and gain insights into different industries and market dynamics.
3.Imaginary Portfolio
Creating an imaginary portfolio is a great way for students to apply their knowledge of the stock market and gain practical experience in investing. Let’s allocate the total amount of Rs. 50,000 equally among five companies from the list provided earlier. Here’s a sample imaginary portfolio:
1. Reliance Industries Limited (RIL) – Rs. 10,000
2.Tata Consultancy Services (TCS) – Rs. 10,000
3.HDFC Bank Limited – Rs. 10,000
4.Infosys Limited – Rs. 10,000
5.Hindustan Unilever Limited (HUL) – Rs. 10,000
Students can distribute their investment equally among these five companies or adjust the allocation based on their research and preferences.
Over a period of twenty working days, students will monitor the daily opening and closing prices of these stocks and record them. They can then calculate the change in the market value of their portfolio based on these fluctuations.
For example, if the opening and closing prices of RIL stock on Day 1 are Rs. 2,000 and Rs. 2,050 respectively, the change in value for that day would be:
Change in value of RIL stock = (Closing Price – Opening Price) * Number of Shares
Change in value of RIL stock = (Rs. 2,050 – Rs. 2,000) * (Rs. 10,000 / Rs. 2,000) = Rs. 250
Students can perform similar calculations for each stock in their portfolio and track the overall performance of their investments over the twenty-day period. This exercise will help them understand how stock prices fluctuate and how these fluctuations impact their portfolio’s value.
4. Analysis of Fluctuations
Analyzing fluctuations in stock prices is a crucial aspect of understanding the dynamics of the stock market. Here’s how students can analyze the fluctuations in the prices of their chosen stocks:
1.Identify Daily Price Changes:
Students should record the daily opening and closing prices of each stock in their portfolio.
They should calculate the absolute and percentage change in prices for each trading day.
2.Look for Patterns and Trends:
Students should analyze the data to identify any patterns or trends in the price fluctuations.
They should look for recurring patterns such as daily or weekly trends, as well as longer-term trends over the twenty-day period.
3.Correlate with External Events:
Students should correlate the fluctuations in stock prices with external events or news that may have influenced the market.
Events such as changes in government policies, economic indicators, company announcements, or global events can impact stock prices.
They can refer to business journals, news websites, or financial news channels to gather information about such events.
4.Evaluate Impact of Events:
Students should evaluate the impact of identified events on the prices of their chosen stocks.
They should assess whether the news or event had a positive or negative effect on the stock prices and to what extent.
5.Consider Market Sentiment:
Students should consider market sentiment and investor behavior in their analysis.
Factors such as investor confidence, market speculation, and institutional trading activity can influence stock prices.
6.Compare with Benchmark Indices:
Students can compare the performance of their portfolio with benchmark indices such as the Nifty 50 or the Sensex.
This comparison can provide insights into whether the fluctuations in their portfolio are in line with broader market trends or if they are outliers.
7.Learn from Experience:
Through this analysis, students will gain practical experience in understanding the complexities of the stock market.
They will learn to make informed decisions based on market trends, news, and their own observations.
By conducting a thorough analysis of fluctuations in stock prices, students will develop a deeper understanding of how the stock market operates and how various factors influence stock prices. This exercise will enhance their analytical skills and prepare them for future investment decisions.
5.Graphical Presentation
Creating graphical presentations of stock prices can help students visualize trends and fluctuations over time. Here’s how they can present the data graphically:
1.Choose Graph Type:
Students can choose suitable graph types such as line graphs or candlestick charts to represent the daily stock prices.
Line graphs are effective for showing trends over time, while candlestick charts provide more detailed information including opening, closing, high, and low prices.
2.Plot Daily Prices:
On the x-axis (horizontal axis), students should plot the dates of the trading days.
On the y-axis (vertical axis), they should plot the stock prices.
Each data point on the graph represents the closing price of the stock for a particular trading day.
3.Connect Data Points:
For line graphs, students should connect the data points to visualize the trend in stock prices over the twenty-day period.
For candlestick charts, each trading day is represented by a “candlestick” consisting of a rectangle (the body) and lines (the wicks) extending from the top and bottom of the body. The body represents the opening and closing prices, while the wicks represent the high and low prices for the day.
4.Add Axis Labels and Titles:
Students should label the x-axis as “Date” and the y-axis as “Stock Price (Rs.)”.
They should add a title to the graph, such as “Daily Stock Prices Over 20 Trading Days”.
5.Include Key Information:
Students can include additional information on the graph, such as the names of the stocks being analyzed and any significant events or news that occurred during the period.
6.Analyze Trends:
Students should analyze the graph to identify trends, patterns, and fluctuations in stock prices over time.
They can use the graph to compare the performance of different stocks in their portfolio and assess their overall investment strategy.
7.Consider Annotations:
Students may choose to annotate the graph with arrows or text to highlight specific events or trends that had a significant impact on stock prices.
Annotations can help viewers understand the context behind certain price movements.
8.Presentation Format:
Students can create digital graphs using spreadsheet software like Microsoft Excel or Google Sheets.
They can also create hand-drawn graphs on graph paper if preferred.
By presenting stock prices graphically, students can gain a clearer understanding of how prices have changed over time and identify patterns that may inform their investment decisions. This visual representation enhances their analytical skills and aids in interpreting complex financial data.
6.Change in Market Value
Calculating the change in market value of the portfolio due to fluctuations in stock prices is essential for evaluating the performance of investments. Here’s how students can calculate the change in market value of their imaginary portfolio:
1.Calculate Initial Investment:
Students should start by calculating the initial investment in each stock. This is the amount of fake money they allocated to each stock in their portfolio.
2.Record Daily Prices:
Students should record the daily opening and closing prices of each stock in their portfolio over the twenty-day period.
3.Calculate Daily Change in Value:
For each trading day, students should calculate the change in value of each stock in their portfolio.
This can be calculated as the difference between the closing price and the opening price, multiplied by the number of shares held.
4.Aggregate Daily Changes:
Students should aggregate the daily changes in value for each stock to determine the total change in value of their portfolio for that day.
5.Calculate Total Portfolio Value:
Students should calculate the total value of their portfolio at the end of each trading day.
This can be done by summing up the current market value of all stocks in the portfolio.
6.Evaluate Performance:
Students should analyze the cumulative change in market value of their portfolio over the twenty-day period.
They can determine whether the portfolio has gained or lost value overall and assess the impact of individual stock performances on the portfolio’s overall performance.
Here’s a simplified example of how students can calculate the change in market value for one stock in their portfolio:
Initial investment in Reliance Industries Limited (RIL): Rs. 10,000
Number of shares purchased: Rs. 10,000 / Opening price of RIL stock
For each trading day, students calculate the change in value of their RIL investment using the difference between the closing and opening prices, multiplied by the number of shares held.
The total change in market value of the portfolio is the sum of the changes in value for all stocks in the portfolio.
By analyzing the change in market value of their portfolio, students can assess the performance of their investments and gain insights into the factors driving fluctuations in stock prices. This exercise helps develop their understanding of investment principles and risk management.
7.Identifying Top Companies
To identify the top companies out of the 25 selected based on their market value of shares, students can follow these steps:
1.Calculate Market Value of Shares:
Determine the market value of shares for each company in the portfolio.
Market value of shares = Current price per share * Total number of shares outstanding.
2.Rank Companies by Market Value:
Rank the companies in descending order based on their market value of shares.
The company with the highest market value of shares will be ranked first, followed by the second-highest, and so on.
3.Identify Top Companies:
Select the top ten companies from the ranked list based on their market value of shares.
These companies will represent the top performers in terms of market capitalization within the portfolio.
4.Consider Additional Factors (Optional):
Optionally, students can consider other factors such as revenue, profitability, growth prospects, and industry position to further assess the performance and potential of the top companies.
5.Document Findings:
Document the names of the top ten companies identified based on their market value of shares.
Provide a brief explanation of why these companies were selected as the top performers.
By identifying the top companies based on their market value of shares, students gain insights into which companies are leading in terms of market capitalization within their portfolio. This exercise helps them understand the importance of market capitalization as a measure of company size and investor confidence. Additionally, it provides an opportunity for students to analyze and compare the performance of different companies in their investment portfolio.
8. After analyzing the performance of their imaginary portfolio and identifying the top companies based on market value, students can draw conclusions and make adjustments to their portfolios. Here’s how they can conclude the project and adjust their portfolios:
(A) Conclusion:
1.Assess Portfolio Performance:
Evaluate the overall performance of the portfolio over the twenty-day period.
Determine whether the portfolio experienced gains or losses and by what magnitude.
2.Identify Factors Driving Performance:
Analyze the factors that contributed to the portfolio’s performance, including individual stock performances, market trends, and external events.
3.Reflect on Investment Decisions:
Reflect on the investment decisions made during the project, including the selection of stocks, allocation of funds, and timing of transactions.
Consider the effectiveness of the investment strategy and lessons learned from the experience.
4.Draw Insights:
Draw insights from the project, such as the importance of diversification, the impact of external factors on stock prices, and the role of research and analysis in making informed investment decisions.
(B) Portfolio Adjustment:
1.Reassess Portfolio Composition:
Reassess the composition of the portfolio based on the performance of individual stocks and market conditions.
Consider reallocating funds among existing stocks or introducing new stocks to the portfolio.
2.Adjust Investment Strategy:
Adjust the investment strategy based on lessons learned from the project and market insights gained.
Consider factors such as risk tolerance, investment goals, and market outlook when making adjustments.
3.Monitor Market Trends:
Continuously monitor market trends, news, and events that may impact the performance of the portfolio.
Stay informed about economic indicators, corporate earnings reports, and regulatory changes that could affect investment decisions.
4.Implement Changes:
Implement changes to the portfolio by buying or selling stocks as necessary.
Ensure that adjustments align with the investment objectives and risk profile of the portfolio.
5.Track Performance:
Track the performance of the adjusted portfolio over time and compare it with benchmark indices or investment goals.
Evaluate the effectiveness of the adjustments and make further changes as needed.
By concluding the project and adjusting their portfolios, students gain valuable insights into the stock market, investment principles, and financial decision-making. This exercise helps them develop critical thinking skills and prepares them for future endeavors in investing and finance.