01-04-2014, 12:42 PM
PERFORMANCE OF EXCHANGE TRADED FUND IN INDIAN STOCK MARKET’ AT HEDGE EQUITIES
PERFORMANCE OF EXCHANGE.doc (Size: 717 KB / Downloads: 13)
INTRODUCTION
EXECUTVE SUMMARY
The study was conducted at HEDGE EQUITIES. The project is entitled as "PERFORMANCE OF EXCHANGE TRADED FUNDS IN INDIAN STOCK MARKET”.
The objective of study was to analyse the performance of exchange traded funds in Indian stock market. The study was based on secondary data collected from website of NSE and web sites like ETF digest, bench mark index etc.
The tools that were used for the analysis are Performance analysis, Return analysis, tracking error analysis. As far as their weekly return analysis SPICE have more fluctuations compared to other ETFs. The study also indicates that all funds have very moderate tracking error. The performance analysis is to rank the ETFs by applying Sharpe performance index supporting SPICE Space first and then UTI SUNDER.
From the study it can be analysed that ETF market provides so many advantages like; liquidity, less risk, good return and flexibility in operation. The ETFs are performing very well with its benchmark index. SPICE was the best performing by applying Sharpe performance index during the analytical period.
SCOPE OF THE STUDY
ETF have gained popularity as an alternative investment instrument by the launch in late 1993. Though technically ETF started in India on Dec. 2001, when Benchmark Asset Management Company introduced its fund known as nifty Bees, because of its scintillating performance ETFs become popular in this infant stage.
Although ETFs are fairly new investment tools, they are growing and making their mark in the investment world. ETF assets have grown about 38.2% so far in 2007 and the number of ETFs available has gone from 359 to 586 in 10 months.
In this present scenario, this study focused on the performance evaluation of ETFs will definitely help the investors to find out where his fund stands in this performance. Also it will help the investors to understand the various factors he should consider for the performance evaluation of his fund.
OVERVIEW OF THE STOCK MARKET
INTRODUCTION
Stock exchange means “any body of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities". It is an association of member brokers for the purpose of self-regulation and protecting the interests of its members.
The history of stock exchanges can be traced to 12th century France, when the first brokers are believed to have developed, trading in debt and government securities. In France the courtiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. As these men also traded in debts, they could be called the first brokers.
INDIAN STOCK MARKET
Indian stock markets are one of the oldest in Asia. The origin of stock market in India can be traced to the later part of the 18th century when long term negotiable securities were first issued. However, the real beginning occurred in the middle of the nineteenth century after the enactment of the Companies Act in 1850, which introduced the feature of limited liability and generated investor interest in corporate securities. At present, there are totally twenty-one recognized stock exchanges in India excluding the Over The Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL).
Post Independence Scenario
The depression witnessed after the Independence led to closure of a lot of exchanges in the country. Lahore Stock Exchange was closed down after the partition of India, and later on merged with the Delhi Stock Exchange. Bangalore Stock Exchange Limited was registered in 1957 and got recognition only by 1963. Most of the other Exchanges were in a miserable state till 1957 when they applied for recognition under Securities Contracts (Regulations) Act, 1956.
TRADING PATTERN OF THE INDIAN STOCK MARKET
Trading in Indian stock exchanges is limited to listed securities of public limited companies. They are broadly divided into two categories, namely, specified securities (forward list) and non-specified securities (cash list). Equity shares of dividend paying, growth-oriented companies with a paid-up capital of at least Rs.50 million and a market capitalization of at least Rs.100 million and having more than 20,000shareholders are, normally, put in the specified group and the balance in non specified group.
Two types of transactions can be carried out on the Indian stock exchanges:
(a) spot delivery transactions "for delivery and payment within the time or on the date stipulated when entering into the contract which shall not be more than 14 days following the date of the contract”: and
(b) Forward transactions "delivery and payment can be extended by further period of 14 days each so that the overall period does not exceed 90 days from the date of the contract". The latter is permitted only in the case of specified shares. The brokers who carry over the outstanding pay carry over charges, which are usually determined by the rates of interest prevailing.
Market Segments and Products
NSE provides an electronic trading platform for of all types of securities for investors under one roof - Equity, Corporate Debt, Central and State Government Securities, TBills, Commercial Paper, Certificate of Deposits (CDs), Warrants, Mutual Funds units, Exchange Traded Funds, Derivatives like Index Futures, Index Options, Stock Futures, Stock Options, Futures on Interest Rates etc., which makes it one of the few exchanges in the world providing trading facility for all types of securities on a single exchange.