The rise and fall of Satyam

Indian outsourcer Satyam has seen its shares plummet by about 40 per cent since a botched attempt two weeks ago to buy two infrastructure firms in which management held stakes and after news that it has been barred from doing business with the World Bank.

However, shares in Satyam Computer Services rose on Monday after it said it would consider more options to improve shareholder value and business practices, including strengthening corporate governance.

Here’s tracing the rise and fall of India’s fourth largest IT services provider.

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Tentative Deal Reached in US Auto Bailout Talks

The White House and congressional Democrats on Tuesday night reached an agreement in principle on a $15 billion proposal for bailing out U.S. automakers, officials said.

A Bush administration official and a Democratic leadership aide said the accord covered key points but a few final details still needed to resolved and put in writing.

The “agreement in concept” as described to CNBC by a senior administration official includes:

• Bridge loans that come from money already appropriated to the Energy Department — these are funds originally intended to help the companies retool to make fuel efficient vehicles. The President’s designee — the so-called ‘Car Czar’ — will bring together all a company’s stakeholders — creditors, labor, shareholders, management, dealers, etc — to negotiate a restructuring by March 31. A 30-day extension may be granted if the czar believes the stakeholders are negotiating in good faith and if the czar believes a deal can be reached in that extension.
• If there’s no deal by March 31, the czar is REQUIRED to call the loan, which would send the company into insolvency.
• If there’s no deal by March 31, the czar would be required to propose his own course of action, which could include Chapter 11 bankruptcy reorganization.
• The legislation will also include taxpayer protections, including, but not limited to, stock warrants and limits on executive compensation.

For more information, click CNBC. All information are gathered from this site.

Archana’s Analysis: Well, this is the  third big bailout package for US automakers worth $ 15 billion. US government is trying hard to regulate economic crisis. Well this deal consists of agreement so called as czar will bring all company’s stakeholder, creditors etc. Indeed it’s a good deal, with time limit till march 31. But one thing is their that ofcourse it will boost auto industry, but if there are no buyers, then it is of no use. I think more promotion should go for credit holders, mortgages and job saving issues. If this is controlled well then I think theyn 50% of issues handling are done to pull up market.

Indian Govt unveils Rs 20,000 cr plan to boost economy

In a virtual mini-budget, the government on Sunday slashed Cenvat by 4 per cent across the board to boost demand and announced Rs 20,000 crore additional non-plan expenditure as part of package to stimulate the economy, hit hard by the global financial crisis.

The much anticipated package, set rolling by Prime Minister Manmohan Singh who is also the Finance Minister, targets to power exports, housing, auto, small and medium industries and infrastructure sectors through additional funding and guarantees that a total amount of about Rs 35,000 crore.

The 10-point package contains substantial incentives for the sectors that have been hit by the global slowdown and recession in the west, besides allowing India Infrastructure Finance Company Ltd to raise Rs 10,000 crore through tax free bonds by March as part of efforts to support Rs 1,00,000 crore programme in the high-way sector.

For more information, click NDTV. All information are gathered from this site.

Archana’s Analysis: Finance Minister Mr. Manmohan Singh declared Rs 20,000 crore additional non-plan expenditure to stimulate Indian economy was rather good step. Initially this decision should have being taken a month back. His main targets as says are housing, power exports, auto etc are perfect sectors to invest in and is required too. Decision is well handled by finanace minister and will help Indian market to have gap up opening on Monday.

Technical Analysis

Technical Analysis of Indian stock market BSE Sensex Index

FAQ’s   Q.1 What is SENSEX?  The SENSEX, short form of the BSE-Sensitive Index, is a “Market Capitalization-Weighted” index of 30 stocks representing a sample of large, well-established and financially sound companies. It is the oldest index in India and has acquired a unique place in the collective consciousness of investors. The index is widely used to measure the performance of the Indian stock markets. SENSEX is considered to be the pulse of the Indian stock markets as it represents the underlying universe of listed stocks at The Stock Exchange, Mumbai. Further, as the oldest index of the Indian Stock market, it provides time series data over a fairly long period of time (since 1978-79).   Q.2 What are the objectives of SENSEX?  The SENSEX is the benchmark index of the Indian Capital Markets with wide acceptance among individual investors, institutional investors, foreign investors and fund managers. The objectives of the index are: To measure market movements  Given its long history and its wide acceptance, no other index matches the SENSEX in reflecting market movements and sentiments. SENSEX is widely used to describe the mood in the Indian Stock markets. Benchmark for funds performance  The inclusion of blue chip companies and the wide and balanced industry representation in the SENSEX makes it the ideal benchmark for fund managers to compare the performance of their funds. For index based derivative products  Institutional investors, money managers and small investors all refer to the SENSEX for their specific purposes The SENSEX is in effect the proxy for the Indian stock markets. The country’s first derivative product i.e. Index-Futures was launched on SENSEX.   Q.3 What are the criteria for selection and review of scrips for the SENSEX?   1. Market Capitalization: The scrip should figure in the top 100 companies listed by market capitalization. Also market capitalization of each scrip should be more than 0.5 % of the total market capitalization of the Index i.e. the minimum weight should be 0.5 %. Since the SENSEX is a market capitalization weighted index, this is one of the primary criteria for scrip selection. (Market Capitalization would be averaged for last six months)  2. Liquidity: (i) Trading Frequency: The scrip should have been traded on each and every trading day for the last one year. Exceptions can be made for extreme reasons like scrip suspension etc. (ii) Number of Trades: Number of Trades: The scrip should be among the top 150 companies listed by average number of trades per day for the last one year. (iii) Value of Shares Traded: Value of Shares Traded: The scrip should be among the top 150 companies listed by average value of shares traded per day for the last one year.  3. Continuity:  Whenever the composition of the index is changed, the continuity of historical series of index values is re-established by correlating the value of the revised index to the old index (index before revision). The back calculation over the last one-year period is carried out and correlation of the revised index to the old index should not be less than 0.98. This ensures that the historical continuity of the index is maintained.  4. Industry Representation:  Scrip selection would take into account a balanced representation of the listed companies in the universe of BSE. The index companies should be leaders in their industry group.  5. Listed History:  The scrip should have a listing history of at least one year on BSE.  B. Qualitative Criteria:    Track Record:  In the opinion of the Index Committee, the company should have an acceptable track record.   Q.4 What is the beta of SENSEX scrips?  Beta measures the sensitivity of a scrip movement relative to movement in the benchmark index i.e. SENSEX. A Beta of one means that for every change of 1% in index, the scrip moves by 1%. Statistically Beta is defined as: Covariance (SENSEX, Stock )/ Variance(SENSEX) Note: Covariance and variance are calculated from the Daily Returns data of the SENSEX and SENSEX scrips.   Q.5 How is SENSEX calculated?  SENSEX is calculated using a “Market Capitalization-Weighted” methodology. As per this methodology, the level of index at any point of time reflects the total market value of 30 component stocks relative to a base period. (The market capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company). An index of a set of a combined variables (such as price and number of shares) is commonly referred as a ‘Composite Index’ by statisticians. A single indexed number is used to represent the results of this calculation in order to make the value easier to work with and track over time. It is much easier to graph a chart based on indexed values than one based on actual values.    Q.6 How is the closing Index calculated?  The closing SENSEX is computed taking the weighted average of all the trades on SENSEX constituents in the last 15 minutes of trading session. If a SENSEX constituent has not traded in the last 15 minutes, the last traded price is taken for computation of the Index closure. If a SENSEX constituent has not traded at all in a day, then its last day’s closing price is taken for computation of Index closure. The use of Index Closure Algorithm prevents any intentional manipulation of the closing index value.   Q.7 How is the routine maintenance of SENSEX carried out?  One of the important aspects of maintaining continuity with the past is to update the base year average. The base year value adjustment ensures that additional issue of capital and other corporate announcements like bonus etc. do not destroy the value of the index. The beauty of maintenance lies in the fact that adjustments for corporate actions in the Index should not per se affect the index values.    Q.8 How are adjustments for Bonus, Rights and newly issued Capital carried out in SENSEX?  The arithmetic calculation involved in calculating SENSEX is simple, but problem arises when one of the component stocks pays a bonus or issues rights shares. If no adjustments were made, a discontinuity would arise between the current value of the index and its previous value. The Index Cell of the Exchange periodically adjusts the base value to take care of such corporate announcements.  Adjustments for Rights Issues:  When a company, included in the compilation of the index, issues right shares, the market capitalisation of that company is increased by the number of additional shares issued based on the theoretical (ex-right) price. An offsetting or proportionate adjustment is then made to the Base Market Capitalisation (see ‘ Base Market Capitalisation Adjustment’ below).  Adjustments for Bonus Issue:  When a company, included in the compilation of the index, issues bonus shares, the market capitalisation of that company does not undergo any change. Therefore, there is no change in the Base Market Capitalisation, only the ‘number of shares’ in the formula is updated.  Other Issues: Base Market Capitalisation Adjustment is required when new shares are issued by way of conversion of debentures, mergers, spin-offs etc. or when equity is reduced by way of buy-back of shares, corporate restructuring etc.  Base Market Capitalisation Adjustment: The formula for adjusting the Base Market Capitalisation is as follows: New Base Market Capitalisation = Old Base Market Capitalisation X (New Market Capitalisation/Old Market Capitalisation)  To illustrate, suppose a company issues right shares which increases the market capitalisation of the shares of that company by say, Rs.100 crores. The existing Base Market Capitalisation (Old Base Market Capitalisation), say, is Rs.2450 crores and the aggregate market capitalisation of all the shares included in the index before the right issue is made is, say Rs.4781 crores. The “New Base Market Capitalisation ” will then be: Rs.2501.24 crores = 2450 X (4781+100)/4781  This figure of 2501.24 will be used as the Base Market Capitalisation for calculating the index number from then onwards till the next base change becomes necessary. Q.9 With what frequency is SENSEX calculation done?  During market hours, prices of the index scrips, at which trades are executed, are automatically used by the trading computer to calculate the SENSEX every 15 seconds and continuously updated on all trading workstations connected to the BSE trading computer in real time.  For more information, click tradersedgeindia. All information are gathered from this site.

Sensitive Index

Welcome to the world of SENSEX, i.e, Sensitive Index.

The BSE Sensex or Bombay Stock Exchange Sensitive Index is a value-weighted index composed of 30 stocks started in April, 1984. It consists of the 30 largest and most actively traded stocks, representative of various sectors, on the Bombay Stock Exchange. These companies account for around one-fifth of the market capitalization of the BSE.

The base value of the sensex is 100 on April 1, 1979, and the base year of BSE-SENSEX is 1978-79.

At irregular intervals, the Bombay Stock Exchange (BSE) authorities review and modify its composition to make sure it reflects current market conditions. The index is calculated based on a free-float capitalization method; a variation of the market cap method. Instead of using a company’s outstanding shares it uses its float, or shares that are readily available for trading. The free-float method, therefore, does not include restricted stocks, such as those held by company insiders.

The index has increased by over ten times from June 1990 to the present. Using information from April 1979 onwards, the long-run rate of return on the BSE Sensex works out to be 18.6% per annum, which translates to roughly 9% per annum after compensating for inflation.

Here is a timeline on the rise and rise of the Sensex through Indian stock market history.

• 1000, July 25, 1990 - On July 25, 1990, the Sensex touched the four-digit figure for the first time and closed at 1,001 in the wake of a good monsoon and excellent corporate results.
• 2000, January 15, 1992 – On January 15, 1992, the Sensex crossed the 2,000-mark and closed at 2,020 followed by the liberal economic policy initiatives undertaken by the then finance minister and current Prime Minister Dr Manmohan Singh.
• 3000, February 29, 1992 – On February 29, 1992, the Sensex surged past the 3000 mark in the wake of the market-friendly Budget announced by the then Finance Minister, Dr Manmohan Singh.
• 4000, March 30, 1992 – On March 30, 1992, the Sensex crossed the 4,000-mark and closed at 4,091 on the expectations of a liberal export-import policy. It was then that the Harshad Mehta scam hit the markets and Sensex witnessed unabated selling.
• 5000, October 11, 1999 – On October 8, 1999, the Sensex crossed the 5,000-mark as the BJP-led coalition won the majority in the 13th Lok Sabha election.
• 6000, February 11, 2000 – On February 11, 2000, the infotech boom helped the Sensex to cross the 6,000-mark and hit and all time high of 6,006.
• 7000, June 21, 2005 - On June 20, 2005, the news of the settlement between the Ambani brothers boosted investor sentiments and the scrips of RIL, Reliance Energy, Reliance Capital and IPCL made huge gains. This helped the Sensex crossed 7,000 points for the first time.
• 8000, September 8, 2005 – On September 8, 2005, the Bombay Stock Exchange’s benchmark 30-share index — the Sensex — crossed the 8000 level following brisk buying by foreign and domestic funds in early trading.
• 9000, December 9, 2005 – The Sensex on November 28, 2005 crossed 9000 to touch 9000.32 points during mid-session at the Bombay Stock Exchange on the back of frantic buying spree by foreign institutional investors and well supported by local operators as well as retail investors.
• 10,000, February 7, 2006 – The Sensex on February 6, 2006 touched 10,003 points during mid-session. The Sensex finally closed above the 10K-mark on February 7, 2006.
• 11,000, March 27, 2006 – The Sensex on March 21, 2006 crossed 11,000 and touched a peak of 11,001 points during mid-session at the Bombay Stock Exchange for the first time. However, it was on March 27, 2006 that the Sensex first closed at over 11,000 points.
• 12,000, April 20, 2006 – The Sensex on April 20, 2006 crossed 12,000 and touched a peak of 12,004 points during mid-session at the Bombay Stock Exchange for the first time.
• 13,000, October 30, 2006 – The Sensex on October 30, 2006 crossed 13,000 and still riding high at the Bombay Stock Exchange for the first time. It took 135 days to reach 13,000 from 12,000. And 124 days to reach 13,000 from 12,500. On October 30, 2006 it touched a peak of 13,039.36 & closed at 13,024.26.
• 14,000, December 5, 2006 – The Sensex on December 5, 2006 crossed 14,000 and touched a peak of 14028 at 9.58AM(IST) while opening for the day December 5, 2006.
• 15,000, July 6, 2007- The Sensex on July 6, 2007 crossed another milestone and reached a magic figure of 15,000. it took almost 7 month and 1 day to touch such a historic milestone. Coincidentally Sachin Tendulkar achieved the same mark (15000 runs in international cricket) around the same time! (The usual refrain of the time was, “Sachin, make runs so Sensex rises!”)
• 16,000, September 19, 2007- The Sensex on September 19, 2007 crossed the 16,000 mark and reached a historic peak of 16322 while closing. The bull hits because of the rate cut of 50 bit/s in the discount rate by the Fed chief Ben Bernanke in US.
• 17,000, September 26, 2007- The Sensex on September 26, 2007 crossed the 17,000 mark for the first time, creating a record for the second fastest 1000 point gain in just 5 trading sessions. It failed however to sustain the momentum and closed below 17000. The Sensex closed above 17000 for the first time on the following day. Reliance group has been the main contributor in this bull run, contributing 256 points. This also helped Mukesh Ambani’s net worth to grow to over $50 billion or Rs.2 trillion. It was also during this record bull run that the Sensex for the first time zoomed ahead of the Nikkei of Japan.
• 18,000, October 9, 2007- The Sensex crossed the 18k mark for the first time on October 9, 2007. The journey from 17k to 18k took just 8 trading sessions which is the third fastest 1000 point rise in the history of the sensex. The sensex closed at 18,280 at the end of day. This 788 point gain on October 9 was the second biggest single day absolute gains.
• 19,000, October 15, 2007- The Sensex crossed the 19k mark for the first time on October 15, 2007. It took just 4 days to reach from 18k to 19k. This is the fastest 1000 points rally ever and also the 640 point rally was the second highest single day rally in absolute terms. This made it a record 3000 point rally in 17 trading sessions overall.
• 20,000, October 29, 2007- The Sensex crossed the 20k mark for the first time with a massive 734.5 point gain but closed below the 20k mark. It took 11 days to reach from 19k to 20k. The journey of the last 10,000 points was covered in just 869 sessions as against 7,297 sessions taken to touch the 10,000 mark from 1,000 levels. In 2007 alone, there were six 1,000-point rallies for the Sensex.
• 21,000, January 8, 2008
• 9,975, October 17, 2008 - Sensex crashes below the psychological 5 figure mark of 10K, following extremely negative global financial indications in US and other countries. Exactly one year back in October 2007, Sensex had gone past the 20K mark.
• 8701.07, October 24, 2008 - lost 10.96% of its value on the intra day trade, the 3rd highest loss for a one day period in its history.

For more information, click wikipedia. All information are gathered from this site.

Archana’s Analysis: If you see the BSE’s history, its not so old but had come up longway in short time. It does affect World Economy. Say starting from 1979  to till date SENSEX has come really a wayoff. I must say that the way Sensex rose since 1990 and ofcourse the ups and downs had really impressed me.

There was time when Sensex used to take year and so for gaining 1000 pts and this is age where it falls 1000pts in a day’s time. Still I would say Indian economy and its sustainability had shown the world that they can manage things.

Basically Sensex’s actual value is 12K-13K. It was real estate and Financial and Banking investments we could see 21 K in Jan 2008.  Still more to comment….