Pradee Report

IMPACT OF EXCHANGE RATES ON GOLD
CHAPTER-I
INTRODUCTION
1.1 INTRODUCTON ABOUT THE INTERNSHIP:
The intent of this project is to provide a thorough description of a plan to establish an

investment firm. In order to accomplish this goal several active investment companies in
the forex market were researched to study their business plans, trading strategies, risk
management and other aspects that constitute an investment firm. Based on this
information, a forex firm was created by replicating some of the useful ideas, dismissing
what does not work and adding some of the group’s ideas to build a more versatile
portfolio for clients.
An internship is a job training process for the professional careers. It is an integral part of
the academic curriculum. Interns may be college or university students or post graduate
adults. These interns will be temporary with or without paid.
This project work has been positioned during the 3rd sem vacation of MBA for a period of
12 weeks. Internship consists of an exchange of information between the students and the
organisation. There are many aspects related to the financial markets, specific countries
regulations, type of portfolio, ways of trading and necessary qualifications that one has to
have an understanding of in order to have a reputable and successful investment firm.
Financial analysis is the starting point for making plans, before using any sophisticated
forecasting and planning procedures. Understanding the past is a prerequisite for
anticipating the future.
1.2 TOPIC CHOOSEN FOR STUDY:
“A STUDY ON IMPACT OF EXCHANGE RATES ON GOLD IN WINGS

WORLD FINCONSULT”.
1.3 NEED FOR THE STUDY:
In any country’s level of trade exchange rates plays a very important role which is
essential for any free market economy in the world. Not in macro level but also in a micro
level exchange rates play a vital role. There is an impact on the real return of an investor’s
Dayananda Sagar Academy of Technology & Management, Bangalore. Page 1

portfolio, profitability of firms and growth of specific sectors amongst various other
determinants of economy due to this. The trading relationships between the countries are
affected in some cases.
1.4 OBJECTIVES OF THE STUDY:

o To analyse the exchange rate impact on the gold price.
o To identify the risk return involved in exchange rate to gold.
o To determine the correlation between gold and exchange rates.
1.5 SCOPE OF THE STUDY:

The study is confined to the WINGS WORLD FINCNOSULT, in Bangalore. In this
study, analysis of the impact of the exchange rates on gold price is done for a period of
five years i.e., 2010-2014.
The data that are used for calculation are of only secondary data.
1.6 METHODOLOGY ADOPTED FOR THE STUDY:
1.6.1 Type of Study:
The research conducted is a descriptive study; this study is conducted to determine the
impact of fluctuations in exchange rate effect on gold price.
1.6.2 Type of Data:
Data that are collected for this study was secondary data which was collected from
various secondary sources like Text Books, internal reports, Journals, Websites etc.,.
The sample consists of Five years of data of one company in the Hydraulic
Manufacturing Industry selected on the basis of the research objective.
1.6.3 Tools of data collection:
Statistical tools like charts, tables are used as tools for the data analysis.

1.7 REVIEW OF LITERATURE:
Larry A. Sjaastad(1)
Examines the theoretical and empirical relationships between the major exchange rates and
the price of gold using forecast error data. It is found that floating exchange rates among the
major currencies have been a major source of price instability in the world gold market and,
as the world gold market now seems to be dominated by the U.S. dollar bloc, appreciations or
depreciations of that dollar would have strong effects on the price of gold in other currencies.
The study by Laughlin(2) (1997)suggests that whether commodities fall in relation to gold or
gold rises in relation to commodities, in either case the value of gold hasrisen .
The study by Ashraf (2005) examines five cases in which the five instances are noted in
which a bott gold oil ratio coincided with falling {or negative) yield spreads, a peaking fed
funds rate, a falling dollar and eventually falling growth.
Adrangi et al.(3) (2003) conclude that gold has a positive relationship with expected
inflation; there exists no relationship with unexpected inflation. Ratanapakorn and Sharma
(2007) studied the long-term and short-term relationships among the US stock price
index(S&P 500) and macroeconomic variables during a study period from 1st quarter 1975 to
4th quarter 1998. The stock price index and long-term interest rates are negatively correlated
as per the empirical study. Blose (2010) has concluded that unexpected changes in CPI do not
affect gold spot prices and investors cannot determine market inflation expectations by
examining the price of gold.
Le et al (2011) have made a study to investigate the relationships between the prices of two
strategic commodities, that is, gold and oil in terms of index of US dollar by using monthly
data from January, 1986 to April, 2011 with the application of financial econometrics.
Empirical results of the study showed that there is a long-run relationship existing between
the prices of oil and gold and the oil price can be used to predict the gold price. A look at the
historic data brings to the plane that when the stock market collapses or when the dollar
depreciates, gold continues to be a safe haven investment for the reason that gold
consumption and prices rise in such circumstances .

Yahyazadehfar and Babaie(5) (2012) have made a study to examine the impact of
macroeconomic variables such as interest rate, house price and gold price on stock price in
capital market of Iran based on monthly data from March 2001 to April 2011 using VAR and
Johansen-Juselius model.
Levin and Wright [6] examined the relationship between Gold prices and the US dollar
prices. Applying co-integration technique on data from January 1976 to August 2005, long-
term determinants of gold prices were established and a long-term relationship between
prices of gold and the level of U.S. dollar prices was found.
Study results revealed that the level of U.S $ prices and prices of gold moves together in a
statistically significant way that 1% increase in a U.S $ price level leads to 1% increase in
gold prices; whereas, in case of any uneven shock, this long-term relationship is deviated
which resulted in weakening of relationship. Findings of their study also explored positive
relationship between gold price movement and US inflation, US inflation volatility and credit
risk
Herbst [7] investigated long run relationship between gold price and the U.S stock prices.
Findings of his study revealed that gold prices and stock prices have cyclic relationship which
found in linear outline instead of phases. Most of the researchers are agreed on the fact that
gold acts as investment manager and used as a hedging tool against inflation. Historical data
from 1930 to 1976 shows that gold has negative beta; and due to its significant
characteristics, when we include it in investment portfolio, it helps to eliminate systematic
risk. It would be short sightedness for investors to exclude gold from investing options
without checking their relation to stock market returns.
1.8 LIMITATIONS OF THE STUDY:
The following are considered as the major limitations for the study:
 Time restriction was only 12weeks of project work in the organization.

 The study is related to WINGS WORLD FINCONSULT, in Bangalore only.
 The study is based on the data that are necessary for it.

CHAPTER-II
INDUSTRY PROFILE AND COMPANY PROFILE:
2.1 INDUSTRY PROFILE:
The foreign exchange market (forex, FX, or currency market) is a global decentralized
market for the trading of currencies. In terms of volume of trading, it is by far the largest
market in the world. The main participants in this market are the larger international
banks. Financial centres around the world function as anchors of trading between a wide
range of multiple types of buyers and sellers around the clock, with the exception of
weekends. The foreign exchange market determines the relative values of different
currencies. The foreign exchange market works through financial institutions, and it operates
on several levels. Behind the scenes banks turn to a smaller number of financial firms known
as “dealers,” who are actively involved in large quantities of foreign exchange trading.
Most foreign exchange dealers are banks, so this behind-the-scenes market is sometimes
called the “interbank market”, although a few insurance companies and other kinds of
financial firms are involved. Trades between foreign exchange dealers can be very large,
involving hundreds of millions of dollars. Because of the sovereignty issue when involving
two currencies, Forex has little (if any) supervisory entity regulating its actions.
The foreign exchange market assists international trade and investments by enabling currency
conversion. For example, it permits a business in the United States to import goods from the
European Union member states, especially Eurozone members, and pay Euros, even though
its income is in United States dollars. It also supports direct speculation and evaluation
relative to the value of currencies, and the carry trade, speculation based on the interest rate
differential between two currencies.[3] In a typical foreign exchange transaction, a party
purchases some quantity of one currency by paying for some quantity of another currency.
Financial markets began to emerge as early as the 12th century in France because people
wanted to manage and regulate the debts of agricultural on behalf of banks. The first
“brokers” were men who traded with debts for the banks. Some men gathered in a building
called “Van der Beurze” in what is now Antwerp, Belgium. This became their primary place
for trading and also institutionalizing a formal way of trading.

This idea spread around neighboring countries and it opened in different places across
Europe. In Venice bankers began to trade government securities, something which was
possible because these bankers were in independent city states ruled by influential citizens.
Italian companies were the first to issue shares and all other companies in England and
Netherlands followed suit.
The Dutch East India Company which was founded in 1602 was the first joint-stock company
(corporation/partnership of two or more individuals who own shares of that company) to get a
fixed capital stock and consequently, continuous trading in company stocks started on the
Amsterdam Exchange. This created room for active trading in various derivatives. Since then
there are stock markets developed in most developing economies.
2.2 Types of Markets:

Since the emergence of the stock market in the 12th century, there have been other markets
that have also surged and prospered. Although we are going to base our company on the
Foreign Exchange Market, we are going to identify the other major markets besides the
foreign exchange market
2.2.1 Bond Market

The best way to describe this market is that it is a market “where individuals can issue new
debt (primary market), buy or sell debt securities (secondary market)”[wikipedia]. This is
generally done in the form of bonds. Bonds are debt securities, in which the issuer owes the
owners a debt and pays interest to use and/or to repay the principal of the debt at a later date.
The primary purpose of the bond market is to provide a mechanism for long term funding of
public and private expenditures. This market has been known for being on e of the less riskier
investments. It is highly sensitive to interest rates, and thus it is often used for changes in the
interest rate.
2.2.2 Derivative Market:

The derivatives market is basically divided in 3 sub-markets, which are:
 Future Contract
 Forward Contract
 Option Contract

History:
During the 4th century, the Byzantine government kept a monopoly on the exchange of
currency.
Currency and exchange was also a vital and crucial element of trade during the ancient world
so that people could buy and sell items like food, pottery and raw materials.[11] If a Greek
coin held more gold than an Egyptian coin due to its size or content, then a merchant could
barter fewer Greek gold coins for more Egyptian ones, or for more material goods. This is
why, at some point in their history, most world currencies in circulation today had a value
fixed to a specific quantity of a recognized standard like silver and gold.
Medieval and later
During the 15th century, the Medici family were required to open banks at foreign locations
in order to exchange currencies to act on behalf of textile merchants.[12][13] To facilitate trade
the bank created the nostro (from Italian translated – "ours") account book which contained
two columned entries showing amounts of foreign and local currencies, information
pertaining to the keeping of an account with a foreign bank.[14][15][16][17] During the 17th (or
18th ) century, Amsterdam maintained an active forex market.[18] During 1704 foreign
exchange took place between agents acting in the interests of the nations of England and
Holland.
Early modern:
Alex. Brown & Sons traded foreign currencies exchange sometime about 1850 and was a
leading participant in this within U.S.A.[20]During 1880, J.M. do Espírito Santo de Silva
(Banco Espírito Santo) applied for and was given permission to begin to engage in a foreign
exchange trading business.
The year 1880 is considered by at least one source to be the beginning of modern foreign
exchange, significant for the fact of the beginning of the gold standard during the year.
Prior to the first world war there was a much more limited control of international trade.
Motivated by the outset of war, countries abandoned the gold standard monetary system
During the 1920s, the Kleinwort family were known to be the leaders of the foreign exchange
market; while Japheth, Montagu & Co., and Seligman still warrant recognition as significant
FX traders.

Market size and Liquidity:
Main foreign Exchange turnover, 1988-2007, measured in billions in USD.
The foreign exchange market is the most liquid financial market in the world.
Traders include large banks, central banks, institutional investors, currency speculators,
corporations, governments, other financial institutions, and retail investors. The average daily
turnover in the global foreign exchange and related markets is continuously growing.
According to the 2010 Triennial Central Bank Survey, coordinated by the Bank for
International Settlements, average daily turnover was US$3.98 trillion in April 2010 (vs $1.7
trillion in 1998). Of this $3.98 trillion, $1.5 trillion was spot transactions and $2.5 trillion was
traded in outright forwards, swaps and other derivatives.
Commercial companies:
An important part of the foreign exchange market comes from the financial activities of
companies seeking foreign exchange to pay for goods or services. Commercial companies
often trade fairly small amounts compared to those of banks or speculators, and their trades
often have little short-term impact on market rates. Nevertheless, trade flows are an important
factor in the long-term direction of a currency's exchange rate. Some multinational
corporations (MNCs) can have an unpredictable impact when very large positions are
covered due to exposures that are not widely known by other market participants.

Central banks:
National central banks play an important role in the foreign exchange markets. They try to
control the money supply, inflation, and/or interest rates and often have official or unofficial
target rates for their currencies. They can use their often substantial foreign exchange
reserves to stabilize the market. Nevertheless, the effectiveness of central bank "stabilizing
speculation" is doubtful because central banks do not go bankrupt if they make large losses,
like other traders would, and there is no convincing evidence that they do make a profit
trading.
Foreign exchange fixing:
Foreign exchange fixing is the daily monetary exchange rate fixed by the national bank of
each country. The idea is that central banks use the fixing time and exchange rate to evaluate
behavior of their currency. Fixing exchange rates reflects the real value of equilibrium in the
market. Banks, dealers and traders use fixing rates as a trend indicator.
The mere expectation or rumor of a central bank foreign exchange intervention might be
enough to stabilize a currency, but aggressive intervention might be used several times each
year in countries with a dirty float currency regime. Central banks do not always achieve their
objectives. The combined resources of the market can easily overwhelm any central bank.
Several scenarios of this nature were seen in the 1992–93 European Exchange Rate
Mechanism collapse, and in more recent times in Asia.
Hedge funds as speculators:
About 70% to 90% of the foreign exchange transactions conducted are speculative. This
means the person or institution that bought or sold the currency has no plan to actually take
delivery of the currency in the end; rather, they were solely speculating on the movement of
that particular currency. Since 1996, Hedge funds have gained a reputation for aggressive
currency speculation. They control billions of dollars of equity and may borrow billions
more, and thus may overwhelm intervention by central banks to support almost any currency,
if the economic fundamentals are in the hedge funds' favor.
Investment management firms:
Investment management firms (who typically manage large accounts on behalf of customers
such as pension funds and endowments) use the foreign exchange market to facilitate
transactions in foreign securities. For example, an investment manager bearing an

international equity portfolio needs to purchase and sell several pairs of foreign currencies to
pay for foreign securities purchases.
Some investment management firms also have more speculative specialist currency
overlay operations, which manage clients' currency exposures with the aim of generating
profits as well as limiting risk. While the number of this type of specialist firms is quite
small, many have a large value of assets under management and, hence, can generate large
trades.
Retail foreign exchange traders:
Individual retail speculative traders constitute a growing segment of this market with the
advent of retail foreign exchange trading, both in size and importance. Currently, they
participate indirectly through brokers or banks. Retail brokers, while largely controlled and
regulated in the USA by the Commodity Futures Trading Commission and National Futures
Association, have in the past been subjected to periodic foreign exchange fraud. To deal with
the issue, in 2010 the NFA required its members that deal in the Forex markets to register as
such (I.e., Forex CTA instead of a CTA).
Those NFA members that would traditionally be subject to minimum net capital
requirements, FCMs and IBs, are subject to greater minimum net capital requirements if they
deal in Forex. A number of the foreign exchange brokers operate from the UK
under Financial Services Authority regulations where foreign exchange trading
using margin is part of the wider over-the-counter derivatives trading industry that
includes Contract for differences and financial spread betting.
There are two main types of retail FX brokers offering the opportunity for speculative
currency trading: brokers and dealers or market makers. Brokers serve as an agent of the
customer in the broader FX market, by seeking the best price in the market for a retail order
and dealing on behalf of the retail customer. They charge a commission or mark-up in
addition to the price obtained in the market. Dealers or market makers, by contrast, typically
act as principal in the transaction versus the retail customer, and quote a price they are willing
to deal at.
Non-bank foreign exchange companies:
Non-bank foreign exchange companies offer currency exchange and international payments
to private individuals and companies. These are also known as foreign exchange brokers but

are distinct in that they do not offer speculative trading but rather currency exchange with
payments (i.e., there is usually a physical delivery of currency to a bank account).
It is estimated that in the UK, 14% of currency transfers/payments are made via Foreign
Exchange Companies. These companies' selling point is usually that they will offer better
exchange rates or cheaper payments than the customer's bank. These companies differ from
Money Transfer/Remittance Companies in that they generally offer higher-value services.
Money transfer/remittance companies and bureaux de change:
Money transfer companies/remittance companies perform high-volume low-value transfers

generally by economic migrants back to their home country. In 2007, the Aite
Group estimated that there were $369 billion of remittances (an increase of 8% on the
previous year). The four largest markets (India, China, Mexico and the Philippines) receive
$95 billion. The largest and best known provider is Western Union with 345,000 agents
globally followed by UAE Exchange
Bureaux de change or currency transfer companies provide low value foreign exchange
services for travelers. These are typically located at airports and stations or at tourist locations
and allow physical notes to be exchanged from one currency to another. They access the
foreign exchange markets via banks or non bank foreign exchange companies.
MSCI World Index of Equities fell while the US dollar Index rose.

Risk aversion:
Risk aversion is a kind of trading behaviour exhibited by the foreign exchange market when a
potentially adverse event happens which may affect market conditions. This behaviour is
caused when risk averse traders liquidate their positions in risky assets and shift the funds to
less risky assets due to uncertainty.
In the context of the foreign exchange market, traders liquidate their positions in various
currencies to take up positions in safe-haven currencies, such as the US dollar.[86] Sometimes,
the choice of a safe haven currency is more of a choice based on prevailing sentiments rather
than one of economic statistics. An example would be the Financial Crisis of 2008. The value
of equities across the world fell while the US dollar strengthened. This happened despite the
strong focus of the crisis in the USA.
2.3 INDIAN FOREX MARKET:
India’s exchange rate was fixed by the central bank until the recent policy changes and there
is little historical experience in modlling exchange rates for the Indian Rupee with a floating
exchange rate.
India: Exchange rate regime and recent trends:

The movement towards market determined exchange rates in India began with the official
devaluation of the rupee in July 1991. In March 1992 a dual exchange rate system was
introduced in the form of the Liberalized Exchange Rate Management System (LERMS).
Under this system all foreign exchange receipts on current account transactions were required
to be submitted to the Authorized dealers of foreign exchange in full, who in turn would
surrender to RBI 40% of their purchases of foreign currencies at the official exchange rate
announced by RBI. The balance 60% could be retained for sale in the free market. As the
exchange rate aligned itself with market forces, the Re/$ rate depreciated steadily from 25.83
in March 1992 to 32.65 in February 1993.
The LERMS as a system in transition performed well in terms of creating the conditions for
transferring an augmented volume of foreign exchange transactions onto the market.
Consequently, in March 1993, India moved from the earlier dual exchange rate regime to a
single, market determined exchange rate system.

The deepening of the foreign exchange market has been aided by the implementation of some
of the recommendations of the Sodhani Committee on Foreign Exchange Markets (1995) and
the Tarapore Committee on Capital Account Convertibility (1997). The Sodhani Committee
(1995) made recommendations to develop, deepen and widen the forex market. A number of
its recommendations regarding introduction of various products and removal of restrictions in
foreign exchange markets to improve efficiency and increase integration of domestic foreign
exchange markets with foreign markets have been implemented.
Liberalisation measures undertaken on the capital account relate to foreign direct investment,
portfolio investment, investment in joint ventures/wholly owned subsidiaries abroad, project
exports, opening of Indian corporate offices abroad, and raising of Exchange Earners Foreign
Currency entitlement.

COMPANY PROFILE
COMPANY NAME : WINGS WORLD FINCONSULT PRIVATE LIMITED
REGISTERED DATE : 10-06-2013
CATEGORY : COMPANY LISTED BY SHARES
SUN CATEGORY : PRIVATE
MANAGING DIRECTOR : TILAK KRISHNAMORTHY
ADDRESS : NO OLD:2/1,CUNNINGHAM ROAD,BANGALORE –
560052.
TELEPHONE : 080 – 41524888
E –MAIL : SUPPORT@WINGSWORLDFINCONSULT.COM

2.4 Background of the company:

Wings World Finconsult focus in training and educating individuals about global market and
to sharpen their skills to participate in the financial world. Wings World Finconsult came
alive with the intention to provide support and guidance to new comers to the trading world.
With our knowledge and years of experience in trading we have customized the training
programme and made it simple for a layman to understand the financial market.
Our courses are targeted for individual investors or traders, novice or experienced, who want
to learn how to use the same tools and techniques as the professional traders.
These courses offer a complete education and training experience focusing on trading
fundamentals, technical analysis, risk management, and highly-developed skills of execution
for virtually any trading instrument.
Our team consists of experts who have a two pronged vision in the field of Consulting and
Training. The team comes with extensive experience in the. This experience equips us to
understand and empathize with our clients in the industry, share their larger vision and also
their small anxieties. We have been there… seen that… and now… are here to offer our hand
in support to help you to achieve your aspiration.
Thilak Krishnamorthy - Managing Director

Santhosh T - General Manager
Bosco Vijay Anand – Business Head
2.5 COMPANIES OPERATIONS:

We believe that we are best suited to be your partners in learning and wealth creation.
Because of the very motive behind Wings world finconsult coming into being, to successfully
co-exist in this competitive world each one of us at Wings world finconsultant will be
working towards your success.

2.5.1 Financial Planning

As you ascend newer highs in your life, your aspirations and needs grow proportionately.
These ever-increasing needs are further compounded by inflation, which depreciates the
purchasing power of your hard-earned money. To achieve your dreams and fulfill your future
obligations, you need to carefully plan your finances. This can be done via sound financial
planning that takes into account your current and future needs, your individual risk profile
and your income to chart out a roadmap to meet these anticipated needs.
2.5.2 Investment Planning

Placing of funds into the proper investment vehicles based on the investor’s future goals,time
horizon and priorities.This also takes into account the safety of the investments as well as
liquidity and level of return.Ideally,proper investment planning will allow the investor’s
funds to produce financial rewards over time.
2.5.3 Risk Management

Risk management is the continuing process to identify, analyze, evaluate, and treat loss
exposures and monitor risk control to mitigate the adverse effects of loss. While a variety
of different strategies can mitigate or eliminate risk, the process for identifying and managing
the risk is fairly standard First, threats or risks are identified. And then the vulnerability of
key assets like information to the identified threats is assessed.
2.5.4 Risk Control Techniques

1. Avoidance of activities which cause loss.
2. Reduction of the frequency of loss - risk prevention.
3. Reduction of the severity of loss - risk reduction.

2.6 SWOT ANALYSIS:
SWOT analysis is a useful method of summaries all the information generated during the
export planning. SWOT stands for strengths, weakness, opportunities and threats, which
helps to isolate the strong and week areas within an export strategy. SWOT also indicates the
future opportunities or threats that may exist in the chosen markets and is instrumental in
strategy formulation and selection.
2.6.1 Strengths:
Business strengths are its resources and capabilities that can be used as a basis for developing
a competitive-advantage. It includes:
 Patents
 Strong brand names.
 Good reputation among customers.
 Cost advantages from proprietary know-how.
2.6.2 Weakness:
The absence of certain strengths may be viewed as a weakness.
 Lack of access to the best natural resources.

 A weak brand name.
 Poor reputation among customers.
 Lack of patent protection
2.6.3 Opportunities:
The external environmental analysis may reveal certain new opportunities for profit and
growth.
 An unfulfilled customer need.

 Arrival of new technologies.
 Loosening of regulations.
 Removal of international trade barriers

2.6.4 Threats:
 Emergence of substitute products.

 New regulations.
 Increased trade barriers
A SWOT analysis can be very subjective, and is an excellent tool for indicating the negative
factors first in order to turn them into positive factors.
2.7 MISSION AND VISION STATEMENT:
2.7.1 MISSION:
At wings world, our mission is to put integrity at the forefront of our business. This
understanding and commitment to deliver global multy asset trading solution makes us well
placed one to be one of premier financial trading companies in the world.
2.7.2 VISION :
Our vision is to be promoting a high quality, transparent and competitive dealing service and
to provide a selection of advanced technology trading platform that enable customer to trade
variety of products.

CHAPTER -III
THEORETICAL BACKGROUND OF STUDY
3.1 CONCEPT OF STOCK MARKET:
The concept of stock markets came to India in 1875, when Bombay Stock Exchange (BSE)
was established as „The Native Share and Stockbrokers Association', a voluntary non-profit
making association. We all know it, the Bhaji market in your neighborhood is a place where
vegetables are bought and sold. Like Bhaji market, a stock market as a place where stocks are
bought and sold.
The stock market determines the day's price for a stock through a process of bid and offer.
You bid to buy a stock and offer to sell the stock at a price. Buyers compete with each other
for the best bid, i.e. the highest price quoted to purchase a particular stock. Similarly, sellers
compete with each other for the lowest price quoted to sell the stock. When a match is made
between the best bid and the best offer a trade is executed. In automated exchanges high-
speed computers do this entire job.
Stocks of various companies are listed on stock exchanges. Presently there are 23 stock
markets In India. The Bombay Stock Exchange (BSE), the National Stock Exchange (NSE)
and the Calcutta Stock Exchange (CSE) are the three large stock exchanges. There are many
small regional exchanges located in state capitals and other major cities. Presently Nifty and
Sensex are moving around to 5900 and 19600 (July 2013). All activities of Indian stock
market are regulated and controlled by SEBI.
3.2 HISTORICAL EVOLUTION OF INDIAN STOCK MARKET :
As already stated, the Indian Stock markets have played a significant role in the early
attempts at industrialization in India in the late nineteenth and early twentieth centuries. The
early textile mills and the first steel plants were funded in the stock market. Some of these
capital raising exercises were large in relation to the size of the financial sector in those days.

Beginning in the late fifties, the country embarked on an inward looking socialistic model of
development that sought to put the commanding heights of the economy in the hands of the
public sector. The state took control of the allocation of resources in the economy as the
banks and insurance companies were nationalized and development financial institutions
grew in importance. A regime of financial repression came into being and the stock market
stagnated.
The period from 1984 to 1992 was in some ways the high water mark of the Indian capital
markets. As the markets responded enthusiastically to the first whiff of reforms in the mid
1980s and to the major reform initiative of 1991, the stock market soared through the roof.
From October 1984 to September 1992, the stock market index went up more than ten times
representing an annual compound return of 34per cent.
3.3 Commodity Market:
A commodity market is a market that trades in primary rather than manufactured

products. Soft commodities are agricultural products such as wheat, coffee, cocoa and sugar.
Hard commodities are mined, such as gold, rubber and oil. Investors access about 50 major
commodity markets worldwide with purely financial transactions increasingly outnumbering
physical trades in which goods are delivered. Futures contracts are the oldest way of
investing in commodities. Futures are secured by physical assets. Commodity markets can
include physical trading and derivatives trading using spot prices, forwards, futures,

and options on futures. Farmers have used a simple form of derivative trading in the
commodity market for centuries for price risk management.
A financial derivative is a financial instrument whose value is derived from a commodity

termed an underlier. Derivatives are either exchange-traded or over-the-counter (OTC). An
increasing number of derivatives are traded via clearing houses some with Central
Counterparty Clearing, which provide clearing and settlement services on a futures exchange,
as well as off-exchange in the OTC market.
Exchange-traded funds (ETFs) began to feature commodities in 2003. Gold ETFs are based
on "electronic gold" that does not entail the ownership of physical bullion, with its added
costs of insurance and storage in repositories such as the London bullion market. According
to the World Gold Council, ETFs allow investors to be exposed to the gold market without
the risk of price volatility associated with gold as a physical commodity. Exchange-traded
funds (ETFs) began to feature commodities in 2003. Gold ETFs are based on "electronic
gold" that does not entail the ownership of physical bullion, with its added costs of insurance
and storage in repositories such as the London bullion market. According to the World Gold
Council, ETFs allow investors to be exposed to the gold market without the risk of price
volatility associated with gold as a physical commodity.
Investment is an integral part of every business. Every business aims for the return on
investment as well it aims for achieving the growth or income value in future. Investment is
the present and the return is future which are full of risk and uncertainty. It involves the
commitment of resources which have been saved or put away from current consumption in
the hope that some benefits will accrue future.
The following discussion will give an explanation of the various ways in which investment is
related or differentiated from the financial and economic sense speculation from investment.
Investment is always involves long term commitment.

3.4 Return:
A return from any investment can be calculated simply by subtracting the amount invested
from the final amount realised. The figure of return thus obtained is a relative figure. Returns
can be calculated for either specific periods or for a combination of periods together.
Investment will be made with expectation of return in the future. A major purpose of funding
or investing is to get an income on the investment fund. On bonds interests are expected as
return whereas in stock it is in the form of dividend.
An investor can expect from the following 3 factors:
 Time value of money

 Expected price levels
 Risk levels
It is a reward for and a motivating force behind investment, the objective of which is usually
to maximize return. Return on a typical investment has to components, the basic one which is
the periodic cash or income receipts, either inters toe dividend, and other which is the
appreciation or depreciation in the price of value of the asset, called the capital gain or the
capital loss. The capital gain is the difference between the purchase price of the asset and the
price at which it can be or sold.
3.4.1 TYPES OF RETURN:
1. Internal rate of return

2. Expected return
3. Rate of return
4. Holding period return
Internal rate of return:
It is one of the important method of capital budgeting used by the firms to make decisions
regarding the long term investments. The IRR is the annualized effective compounded return
rate which can be earned on the invested capital, i.e. the yield on the investment.

Project can be considered as the best investment by a firm. If the IRR is greater the required
rate of return it is better to invest in other sources such as bank, bonds etc.,. IRR includes the
risk premium. In general, if the IRR is the cost of capital or hurdle rate, the project will have
the value for the company greater than the project’s.
Rate of return:
ROI is also known as rate of profit, or rate of return. ROI is the return on a past or current
investment, or the estimated return on a future investment. ROI is usually given on the
percentage basis. It is generally on annual rate of return.
Rate of Return (ROR) is also known as Return On Investment (ROI). It is the ratio of money
gained or lost on an investment relative to the amount of money invested. The amount of
money gained or lost may be referred to as interest, profit/loss, gain/loss, or net income/loss.
The money invested may be referred to as the asset, capital, principal, or the cost basis of the
investment.
Expected Return:
Expected return is the estimation of the value of an investment, including the change in the
price and any payments or dividends calculated from a probability distribution. The expected
rate of return is the weighted average of all possible return multiplied by their respective
probabilities.
3.5 RISK:
Risk refers to the dispersion or deviation of returns from the average return of such
investment. Risk is measured by calculating Standard Deviation. In statistics, the standard
deviation (SD) (represented by the Greek letter sigma, σ) is a measure that is used to quantify
the amount of variation or dispersion of a set of data values. A standard deviation close to 0
indicates that the data points tend to be very close to the mean (also called the expected
value) of the set, while a high standard deviation indicates that the data points are spread out
over a wider range of values.
Every investment is included with risk and uncertainity. It is an integral part for investment
decisions. Risk can be estimated whereas the uncertainity cannot be estimate. The standard
deviation is commonly used to measure confidence in statistical conclusions.

The major forces for risk are interest and price. Risk can be influenced by internal as well as
external. Internal risk can be controlled but the external risks cannot be controlled such as
earthquake, flood etc.,.
The external risk is called systematic risk. Risk due to internal environment of a firm or that
affecting a particular industry is referred to as unsystematic risk. The standard deviation of
a random variable, statistical population, data set, or probability distribution is the square
root of its variance.
TYPES OF RISK:
Risk is of majorly 2types:
 Systematic Risk
 Unsystematic risk
Total risk = Systematic risk + Unsystematic risk
Systematic Risk:
Occurrence of certain events can affect all companies firms at the same time. This is known
as systematic risk. Events such as inflation, war and fluctuating interest rates influence the
entire economy and not just a specific firm or industry. Diversification cannot eliminate this
type of risk. Therefore, it is considered un-diversifiable risk. This type of risk accounts for
most of the risk in a well-diversified portfolio. Systematic risk relates to volatility due to a
particular market or economy. Systematic risk originates from uncontrollable forces and is
therefore not unique to the stock of the company.
Virtually all securities have some systematic risks, whether bonds or stocks because
systematic risk directly encompasses interest rates, market and inflation risks the investor
cannot escape this part of the overall market cannot be avoided.
Types of systematic risk
1. Market risk
2. Interest rate risk
3. Purchasing power or inflation risk
4. Regulation risk

Unsystematic risk:
Unsystematic risk is the risk that is specific to a company. This type of risk could include
dramatic events such as strike, a natural disaster like a fire or something as simple as feeling
sales. Two common sources of unsystematic risk are business risk and financial risk.
Diversification can help eliminate unsystematic risk from a portfolio. It is unlikely that events
such as the once listed above would happen in every firm at the same time therefore, by
diversifying, one can reduce their risk. There is no reward for taking on un-necessary
unsystematic risk.
Types of unsystematic risk
 Business risk
 Re-investment risk
 International risk
 Liquidity risk
Business Risk:
Every business organisation involves some element of risk. Risk implies uncertainity of
profits or danger of loss due to some unforeseen events in the future. The following are the
types of business risk:
1. Price risk:
It means the uncertainity arises in the cash flows due to the changes in the prices of output
and input. Price Risk are as follows:
 Exchange Rate Risk

 Interest Rate Risk
 Commodity Price Risk
2. Credit Risk:
Credit risk is the risk of default or change in the credit quality of issuers of securities
to whom a company has an exposure. It involves:/
 Default Probabilities
 Recovery Rate
 Transition Probabilities

3. Pure Risk:
Pure risks are associated with uncertainties which may cause loss. In a pure situation,
either a loss occurs or no loss occurs-there is no possibility for gain.
Types of Pure Risk:
 Personal Risk
 Property Risk
 Liability Risk
Tools of measuring risk:
 Beta
 Variance
 Standard deviation
 Correlation
3.5.1 Beta:
In finance, the beta (β) of an investment is a measure of the risk arising from exposure to
general market movements as opposed to idiosyncratic factors. The market portfolio of all
investable assets has a beta of exactly 1. A beta below 1 can indicate either an investment
with lower volatility than the market, or a volatile investment whose price movements are not
highly correlated with the market.
A beta above one generally means that the asset both is volatile and tends to move up and
down with the market. Beta is important because it measures the risk of an investment that
cannot be diversified away.
It does not measure the risk of an investment held on a stand-alone basis, but the amount of
risk the investment adds to an already-diversified portfolio. In the capital asset pricing model,
beta risk is the only kind of risk for which investors should receive an expected return higher
than the risk-free rate of interest.
‘Beta’ measure the sensitivity of a stock price relative to the fluctuations of a particular stock
market index. Beta is calculated by relating the relevant returns of a large sample of stocks
such as CNX NIFTY, BSE.

The concept of beta for measuring the riskiness of a stock is, if investor selects stocks with
low betas(less than 1), then the investor will suffer less in a falling market. However, it is
desirable to choose stocks with betas varying between 0.5 and 1.5.
3.5.2 Variance:
It is the sum of the squares of the deviations of actual from the expected returns. Positive
value of variance is considered unfavorable and negative values as favorable.
3.5.3 Correlation:
A statistical measure of how two securities move in relation to each other is known as
Correlation. Correlations are used in advanced portfolio management. It is the covariance
divided by the product of standard deviations. The correlation co-efficient can vary between -
1.0 and +1.0.

EQUATIONS:
EXPECTED RETURN: - (ER)
1. If probability is given
𝒏
E(R)= ∑(𝑷𝒊)(𝑹𝒊)
𝒊=𝟎
2. If probability not given
E(R) = ∑X/n
𝐓𝐨𝐝𝐚𝐲 𝐩𝐫𝐢𝐜𝐞−𝐘𝐞𝐬𝐭𝐞𝐫𝐝𝐚𝐲 𝐩𝐫𝐢𝐜𝐞

3. Today return E(R) = × 𝟏𝟎𝟎
𝐘𝐞𝐬𝐭𝐞𝐫𝐝𝐚𝐲
Co-relation :-(₰)
𝐧 ∑ 𝐱𝐲−∑ 𝐱 × ∑ 𝐲 𝒄𝒐𝒗(𝒙𝒚)
₰= 𝐧
₰ = (𝝈𝒙)(𝝈𝒚 )
√𝐧 ∑ 𝐱 𝟐 −(∑ 𝐱)𝟐 √
∑ 𝐲 𝟐 −(∑ 𝐲)𝟐
Determination :-(D)
𝑫 = (₰)𝟐
RISK :-(𝝈)
If probability is given
̅ )𝟐
𝝈 = √∑ 𝑷(𝑿 − 𝑿

If probability not given number of observation more than 2
̅ )𝟐
∑(𝑿 − 𝑿
𝝈= √
𝒏−𝟏
If probability not given number of observation is only 2
̅ )𝟐
∑(𝑿 − 𝑿
𝝈= √
𝒏
BETA :-(β)
If probability not given
n ∑ xy − ∑ x × ∑ y
β=
n ∑ x 2 − (∑ x)2
Note: - considered x is a market return and y is a individual company return.
If probability is given
cov(xy)
β=
σx 2
Systematic Risk:-
Systematic Risk = β2 × σm2
Unsystematic Risk:-
Unsystematic Risk = σi2 − Systematic Risk

CHAPTER- IV
ANALYSIS & INTERPRETATION
4.1 USD:
4.1.1 Return(y):
Table 1:
Table showing the return value for USD Currency from 2010 to 2014
Year 2010 2011 2012 2013 2014
RM ( -1.3% 12.8% 6.2% 14.0% -0.3%
Graph 1: showing the return value for USD
RETURN (Y)
16.0%
14.0%
12.0%
10.0%
% of return
8.0%
6.0%
RM
4.0%
2.0%
0.0%
-2.0% 2010 2011 2012 2013 2014
-4.0%
Years
Interpretation:
From the above table and graph, it is identified that the return of US Dollars against the gold
is increasing from -1.3% to 12.8% in the year 2011, it has decreased in 2012 to 6.2% then it
increased from 6.2% to 14% and again decreased to -0.3%. It is observed that the fluctuation
in the exchange rate of US currency is having an affect towards the gold prices.

4.1.2 BETA:
Table 2: Table showing the beta values for USD
Year 2010 2011 2012 2013 2014
BETA 0.13 -0.28 0.18 0.31 0.36
Graph 2: showing the beta values for USD
BETA
0.40
0.30
0.20
BETA Value
0.10
0.00
BETA
2010 2011 2012 2013 2014
-0.10
-0.20
-0.30
-0.40
Years
Interpretation:
The market portfolio of all investable assets has a beta of exactly 1. It can be observed that
the beta values has decreased in the year 2011 and there by increasing over the period of
time. If the beta is more than it indicates that the company’s investment is also increasing
accordingly and vice versa.

4.1.3 r (correlation):
Table 3: Table showing the correlation value
Year 2010 2011 2012 2013 2014
r(correlation) 0.15 -0.28 0.11 0.41 0.63
Graph 3: showing the correlation value
r(correlation)
0.70
0.60
0.50
0.40
0.30
Value of r
0.20
0.10 r(co-relation)
0.00
-0.10 2010 2011 2012 2013 2014
-0.20
-0.30
-0.40
Years
Interpretation:
From the above table and graph, it shows the correlation between the US currency and Gold.
During the year 2011 it has decreased when compared to other period of years. There is a
positive correlation between the US dollar to gold except one year.

4.1.4 SD (risk):
Table no 5: Table showing the risk value
Year 2010 2011 2012 2013 2014
Sd 0.029 0.047 0.023 0.050 0.029
Graph no 5: showing the risk value
sd(risk)
0.060
0.050
0.040
Values of sd
0.030
0.020 sd(risk)
0.010
0.000
2009 2010 2011 2012 2013 2014 2015
Years
Interpretation:
Every trading activity is involved with risk. The table & the graph indicate that the risk
involved is more in the exchange rates as its fluctuations are unpredictable. In the year 2013
the risk is more when compared to other years. If the risk is more the return in that year also
will be higher.

4.2 GBP
4.2.1 Return(y):
Table 6: Table representing the return value for GBP Currency from 2010 to 2014
Year 2010 2011 2012 2013 2014
RM -6.39% 13.48% 8.12% 16.55% -3.06%
Graph 6: representing the return value for GBP Currency
Return(y)
20.00%
15.00%
10.00%
% OF RETURN
5.00%
Return(y)
0.00%
2010 2011 2012 2013 2014
-5.00%
-10.00%
Years
Interpretation:
From the above table and graph, it is identified that the return of GBP currency against the
gold is increasing from -6.39% to 13.48% in the year 2011, it has decreased in 2012 to 8.12%
then it increased from 16.55% to 14% and again decreased to -3.06%. It is observed that the
fluctuation in the exchange rate of GBP currency is having an affect towards the gold prices.

4.2.2 BETA
Table 7: Table showing the value of beta for GBP
Year 2010 2011 2012 2013 2014
BETA 1 0.0039 -0.0552 0.2005 0.5756
Graph 7: showing the value of beta for GBP
BETA
0.8
0.6
Beta value
0.4 BETA
0.2
0
2010 2011 2012 2013 2014
-0.2
Years
Interpretation:
the beta values of GBP to Gold has decreased in the year 2011, then it even decreased to -
0.0552 and there by increasing over the period of time. If the beta is more than it indicates
that the company’s investment is also increasing accordingly and vice versa.

4.2.3 r(co-relation)
Table 8: Table showing the correlation of GBP with Gold
Year 2010 2011 2012 2013 2014
R 1 0.007 -0.042 0.239 0.713
Graph 8: showing the correlation of GBP with Gold
r(co-relation)
1
0.8
0.6
Value of r
0.4
r(co-relation)
0.2
0
2010 2011 2012 2013 2014
-0.2
Years
Interpretation:
From the above table and graph, it shows the correlation between the GBP currency and
Gold. During the years 2011 and 2012 it shows the decreasing trend when compared to other
periods of time. There is a positive correlation between the GBP to gold except 2011 and
2012.

4.2.4 Sd(risk)
Table 10: Table showing the risk values
Year 2010 2011 2012 2013 2014
Sd 0.029 0.047 0.023 0.050 0.029
Graph 10: showing the risk values
sd(risk)
0.06
Values of sd
0.04
0.02
0 sd(risk)
2010 2011
2012
2013
2014
Years
Interpretation:
Every trading activity is involved with risk. The table & the graph indicate that the risk of
GBP to gold involved is more in the exchange rates as its fluctuations are unpredictable. In
the year 2013 the risk is more when compared to other years. If the risk is more the return in
that year also will be higher.

4.3 EURO
4.3.1 Return(y):
Table 11: Table showing the return for EURO currency from 2010 to 2014
Year 2010 2011 2012 2013 2014
RM -15.09% 15.89% 2.76% 18.17% -8.96%
Graph 11: showing the return for EURO currency
Return(y)
20.00%
10.00%
% of return
0.00%
-10.00% 2010 2011 2012 2013 Return(y)
2014
-20.00%
Year
Interpretation:
From the above table and graph, it is identified that the return of EURO against the gold is
increasing from -15.09% to 15.89% in the year 2011, it has decreased in 2012 to 2.76% then
it increased from 2.76% to 18.17% and again decreased to -8.96%. It is observed that the
fluctuation in the exchange rate of EURO currency is having an affect towards the gold
prices.

4.3.2 BETA:
Table 12: Table showing the beta for EURO
Year 2010 2011 2012 2013 2014
BETA 0.154 -0.112 -0.161 0.377 0.469
Graph 12: showing the beta for EURO
BETA
2500
2000
1500
Beta value
Year
1000
BETA
500
0
1 2 3 4 5
-500
Years
Interpretation:
the beta values has decreased in the years 2011 & 2012 and thereby increasing over the
period of time. If the beta is more than it indicates that the company’s investment is also
increasing accordingly and vice versa.

4.3.3 r(correlation):
Table 13 Table showing the correlation of EURO with Gold
year 2010 2011 2012 2013 2014
r 0.140 -0.223 -0.122 0.571 0.722
Graph 13 showing the correlation of EURO with Gold
r(co-relation)
0.800
0.600
0.400
Value of r
0.200
0.000
2010 2011 2012 2013 2014
-0.200
-0.400
Years
Interpretation:
From the above table and graph, it shows the correlation between the EURO currency and
Gold. During the years 2011 and 2012 it shows the decreasing trend when compared to other
periods of time. There is a positive correlation between the EURO to gold except 2011 and
2012. It means that in the year 2010 there is a less positive correlation, 2013 it shows
moderate and in 2014 there is a high positive correlation, in 2011 and 2012 it is negative
correlation between EURO and gold.

4.3.4 Sd(risk):
Table 15: Table showing the risk values
Year 2010 2011 2012 2013 2014
Sd 0.0290 0.0472 0.0228 0.0500 0.0285
Graph 15: showing the risk values
sd(risk)
0.0600
Value of sd
0.0400
0.0200
0.0000
sd(risk)
2010
2011
2012
2013
2014
Years
Interpretation:
involved is more in the exchange rates i.e., EURO as its fluctuations are unpredictable. In the
year 2013, the risk is more when compared to other years. If the risk is more, the return in
that year also will be higher.

4.4 YEN:
4.4.1 Return(y):
Table 16: Table showing the return values of YEN currency with Gold
Year 2010 2011 2012 2013 2014
RM 4.12% 20.24% 0.85% -7.26% -14.37%
Graph 16: showing the return values of YEN currency with Gold
Return(y)
25.00%
20.00%
15.00%
% of return
10.00%
5.00% Return(y)
0.00%
-5.00% 2010 2011 2012 2013 2014
-10.00%
-15.00%
Years
Interpretation:
From the above table and graph, it is identified that the return of YEN against the gold is
increasing from 4.12% to 20.24% in the year 2011and there by it shows the decreasing trend
further. It is observed that the fluctuation in the exchange rate of YEN currency is having an
affect towards the gold prices.

4.4.2 BETA:
Table 17: Table showing the beta values of YEN currency with Gold
Year 2010 2011 2012 2013 2014
BETA 0.440 -0.165 0.667 0.471 0.378
Graph 17: showing the beta values of YEN currency with Gold
BETA
0.800
0.600
0.400
Beta value
0.200
BETA
0.000
2010 2011 2012 2013 2014
-0.200
-0.400
Years
Interpretation:
the beta values has decreased in the year 2011, increased in 2012 from -0.165 to 0.667 and
thereby decreasing over the period of time. If the beta is more than it indicates that the
company’s investment is also increasing accordingly and vice versa.

4.4.3 r (correlation):
Table 18: Table showing the correlation values of YEN currency with Gold
Year 2010 2011 2012 2013 2014
R 0.285 -0.227 0.324 0.464 0.365
Graph 18: showing the correlation values of YEN currency with Gold
r(co-relation)
100%
80%
60% 0.285 0.324 0.464 0.365
40%
Value of r
20%
0%
-20% 2010 2011 2012 2013 2014
-40% -0.227
-60%
-80%
-100%
Years
Interpretation:
From the above table and graph, it shows the correlation between the YEN currency and
Gold. During the year 2011 it has decreased gradually when compared to other period of
years. There is a positive correlation between the YEN to gold during 2010, 2012, 2013 and
2014.

4.4.4 Sd(risk):
Table 20: Table showing the risk values of YEN currency with Gold
Year 2010 2011 2012 2013 2014
SD 0.0290 0.0472 0.0228 0.0500 0.0285
Graph 20: showing the risk values of YEN currency with Gold
sd(risk)
0.0500
0.0400
Value of sd
0.0300
0.0200 sd(risk)
0.0100
0.0000
2010 2011 2012 2013 2014
Years
Interpretation:
involved is more in the exchange rates i.e., of YEN to gold, as its fluctuations are
unpredictable. In the year 2013 the risk is more when compared to other years.

4.5 Overall of all currency:
4.5.1 RETURN
Table 21: Table showing return for all currencies & Gold
CURRENCY RETURN%
Gold 48.69%
USD 31.42%
GBP 28.70%
EURO 12.76%
YEN 3.58%
Graph 21: showing return for all currencies & gold
RETURN
50.00%
40.00%
% of return
30.00%
20.00% RETURN
10.00%
0.00%
Gold USD GBP EURO YEN
Currency

Interpretation:
From the above table and graph, it is identified that the return of USD is more when
compared to other country currency. It shows that the USD is having more impact on gold in
case of return.
When all the currencies are compared to gold US currency shows more yield rather than the
other, that means investing in US currency will have a high impact on gold and can have a
greater return.

4.5.2 BETA
Table 22: Table showing beta value for all currencies & gold
CURRENCY BETA VALUE
Gold 1
USD 0.0915
GBP 0.1282
EURO 0.1530
YEN 0.3197
Graph 22: showing beta value for all currencies & gold
BETA
1
0.9
0.8
0.7
Beta value
0.6
0.5
BETA
0.4
0.3
0.2
0.1
0
Currency

Interpretation:
The market portfolio for beta should be always equal to 1. In the above table and graph it
shows that YEN is having more volatile towards gold. From the above table and graph, it
shows that if the beta value increases by 1% the YEN currency value will increase by 0.32%
and vice versa.
EURO, GBP & USD currencies are having less volatile compared to YEN currency. YEN
currency is highly correlated to gold rather than other 3 currencies.

4.5.3 Sd(risk):
Table 23: Table showing risk value for all currencies & gold
CURRENCY SD %
Gold 3.80%
USD 2.98%
GBP 3.08%
EURO 2.92%
YEN 4.17%
Graph 23: showing risk value for all currencies & gold
SD
4.50%
4.00%
3.50%
3.00%
Value of sd
2.50%
2.00%
SD
1.50%
1.00%
0.50%
0.00%
Currency

Interpretation:
Risk is an integral part of the investment. In general, it is said that if risk is more return will
also be more and vice versa.
From the above table and graph, it is indicating that EURO currency is having less risk
compared to other 3 currencies, it indicates that the return of EURO is also less on gold ie.,
risk is 2.92% and return is 12.76%.
It can be said that the investment in EURO currency will be having a less impact on gold with
less risk of loosing.

4.5.4 CORRELATION
Table 24: Table showing CORRELATION of all currencies with gold
CURRENCY COR WITH GOLD
USD 0.117
GBP 0.158
EURO 0.200
YEN 0.291
Graph 24: showing CORRELATION of all currencies with gold
CORRELATION
0.300
Value of r
0.200
0.100
0.000 CORRELATION
USD GBP
EURO YEN
Currency

Interpretation:
From the above table and graph, it is identified that there is positive correlation between gold
and the currencies. In that, YEN currency correlation with gold is more compared to EURO,
GBP & USD.
The correlation of YEN is 29.1% with gold, whereas EURO has 20%, USD 15.8% and GBP
has 11.7% of correlation with the gold which indicates that YEN is impacting the gold more
than the other currencies.

CHAPTER-V
FINDINGS, SUGGESTION & CONCLUSION
5.1 Findings:
 It is found that the returns of all the currencies are more except YEN individually.
 It is identified that there is a positive correlation between the 4 currencies and gold. It
shows the high correlation in the year 2014 for USD & EURO, in 2010 for GBP and
in 2013 for YEN currency.
 It is found that all currencies are having the less risk in the year 2012 when they are
compared individually.
 Among the currencies USD performs good and gives the maximum expected return to
the investors. It is also identified that the USD has the high return i.e., 31.42%.
 Systematic risk i.e., beta is high in case of YEN currency which cannot be controlled.
 It is found that, the EURO currency is bearing less risk (2.92%) and the expected is
12.76%.
 In case of correlation, EURO and YEN has a significant relationship with the gold
and USD & GBP is not having the significant relationship with the gold like EURO
and YEN.

5.2 SUGGESTIONS:
 It is suggested to the investors that, they can earn good return in case of USD.
Hence they can invest in this currency.
 It is noticed that the risk level is high in case of YEN currency, so the investors
can avoid the investment on YEN.
 The correlation of USD and GBP currencies with gold is less compared to EURO
and YEN with gold.
 In the view point of investors, investing in YEN and EURO will not give more
return. It is suggested that they can invest where the return is more having less
risk involved.

5.3 CONCLUSIONS:

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IMPACT OF EXCHANGE RATES ON GOLD

1.1 INTRODUCTON ABOUT THE INTERNSHIP:

The intent of this project is to provide a thorough description of a plan to establish an

1.2 TOPIC CHOOSEN FOR STUDY:

“A STUDY ON IMPACT OF EXCHANGE RATES ON GOLD IN WINGS

1.3 NEED FOR THE STUDY:

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1.4 OBJECTIVES OF THE STUDY:

1.5 SCOPE OF THE STUDY:

1.6 METHODOLOGY ADOPTED FOR THE STUDY:

1.6.1 Type of Study:

1.6.2 Type of Data:

1.6.3 Tools of data collection:

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1.7 REVIEW OF LITERATURE:

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1.8 LIMITATIONS OF THE STUDY:

 Time restriction was only 12weeks of project work in the organization.

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INDUSTRY PROFILE AND COMPANY PROFILE:

2.1 INDUSTRY PROFILE:

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2.2 Types of Markets:

2.2.1 Bond Market

2.2.2 Derivative Market:

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Medieval and later

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Market size and Liquidity:

Main foreign Exchange turnover, 1988-2007, measured in billions in USD.

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Foreign exchange fixing:

Hedge funds as speculators:

Investment management firms:

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Retail foreign exchange traders:

Non-bank foreign exchange companies:

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Money transfer/remittance companies and bureaux de change:

Money transfer companies/remittance companies perform high-volume low-value transfers

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2.3 INDIAN FOREX MARKET:

India: Exchange rate regime and recent trends:

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COMPANY NAME : WINGS WORLD FINCONSULT PRIVATE LIMITED

REGISTERED DATE : 10-06-2013

CATEGORY : COMPANY LISTED BY SHARES

SUN CATEGORY : PRIVATE

MANAGING DIRECTOR : TILAK KRISHNAMORTHY

ADDRESS : NO OLD:2/1,CUNNINGHAM ROAD,BANGALORE –

TELEPHONE : 080 – 41524888

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2.4 Background of the company:

Thilak Krishnamorthy - Managing Director

2.5 COMPANIES OPERATIONS:

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2.5.1 Financial Planning

2.5.2 Investment Planning

2.5.3 Risk Management

2.5.4 Risk Control Techniques

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2.6 SWOT ANALYSIS: