A MAJOR RESEARCH PROJECT IS SUBMITTEB TO DEVI AHILYA VISHWA VIDHYALAYA, INDORE TOWARDS PARTIAL FULFILLMENT FOR THE DEGREE

OF MASTER OF BUSINESS ADMINISTRATION (Year 2009-2011) On

A STUDY OF PERCEPTUAL DIFFERENCE OF INVESTORS BETWEEN PRECIOUS METAL AND STOCK PRICES

Guided By:Prof. Shweta Dhand Lecturer, MIST, Indore

Submitted By:Ajeej Ahmed MBA IV SEM

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Student Declaration I hereby declare that this Project report entitled A Study of Perceptual Difference of Investors Towards Precious metal and Stock Prices submitting for the partial fulfillment of the requirement for the degree of MBA from Devi Ahilya University; this is my original work, carried out under the guidance of my faculty guide Prof. Shweta Dhand.

Name & Signature .

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ACKNOWLEDGEMENT

To acknowledge all the persons who had helped for the fulfillment of the project is not possible for any researcher but in spite of all that, it becomes a foremost responsibility of the researcher and also the part of research ethics to acknowledge those who had played a great role for the completion of the project. So in the same sequence at very first, I would like to thank my parents because of whom I got the existence in the world for the inception and the conception of this project. Later on I would like to confer the flower of acknowledgement to my guide Prof. Shweta Dhand and other faculty members who taught me that how to work on the project through appropriate tools and techniques. I thank (mention the name of the company on which the project is done) because they have supported me with the relevant information and gave me a chance to do my integrated research study. Rest all those people who helped me are not only matter of acknowledgement but also authorized for sharing my success. Thanks

AJEEJ AHMED MBA Final year

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PREFACE

Project studies constitute the backbone of my management education program and help a lot in the practical aspects of my management studies if a proper attempt is made on the part of the students of MBA who required undergo practical exposure in an industry for the same. I got an opportunity to do the project on "A Study of Perceptual Difference of Investors between Precious Metal and Stock Prices".

This project is mainly based on depth study on investment areas. The objective of my study was find out the safest investment area with maximum return between investing savings in Stock market and/or Gold. I have placed in my best efforts in making this report a satisfaction but still I'll welcome any suggestion for improving the same.

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INDEX

S.No. 1. CHAPTER:- I

CONTENT

PAGE No.

1.1 Introduction 1.2 Conceptual Framework 1.3 Literature Review 1.4 Objective of the Study 1.5 Industry Analysis 1.6 Rationale of Study 2. CHAPTER:-II 1.1 Research Design 1.2 Tools for Collection of Data 1.3 Tools for Data Analysis CONCLUSION LIMITATION REFERENCES

06-26

28-49

3. 4. 5.

50 51 52

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Chapter 1.

1.1 INTRODUCTION
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COMMODITY MARKET:Commodity markets are markets where raw or primary products are exchanged. These raw commodities are traded on regulated commodities exchanges, in which they are bought and sold in standardized contracts. This article focuses on the history and current debates regarding global commodity markets. It covers physical product (food, metals, electricity) markets but not the ways that services, including those of governments, nor investment, nor debt, can be seen as a commodity. Articles on reinsurance markets, stock markets, bond markets and currency markets cover those concerns separately and in more depth. One focus of this article is the relationship between simple commodity money and the more complex instruments offered in the commodity markets.

COMMODITY:A commodity is some good for which there is demand, but which is supplied without qualitative differentiation across a market. It is fungible, i.e. the same no matter who produces it. Examples are petroleum, notebook paper, milk or copper. The price of copper is universal, and fluctuates daily based on global supply and demand. Stereo systems, on the other hand, have many aspects of product differentiation, such as the brand, the user interface, the perceived quality etc. The more valuable a stereo is perceived to be, the more it will cost. In contrast, one of the characteristics of a commodity good is that its price is determined as a function of its market as a whole. Well-established physical commodities have actively traded spot and derivative markets. Generally, these are basic resources and agricultural products such as iron ore, crude oil, coal, ethanol, salt, sugar, coffee beans, soybeans, aluminum, copper, rice, wheat, gold, silver, palladium, and platinum. Soft commodities are goods that are grown, while hard commodities are the ones that are extracted through mining. PRECIOUS METAL:-

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Precious metals are indexed on what is called a 'spot market' which trades commodities such as precious metals that are sold or bought for immediate delivery or perhaps in the very near future. They are traded based on spot prices which change throughout the day. In much the same way as currency pairs are traded, precious metal markets are open around the clock in their respective markets and transactions are considered to be over the counter (OTC). Because prices rise and fall throughout the day, this is very fluid market that bears watching on a continual basis. The most common precious metals spot traded are gold, silver, platinum and palladium. Sometimes rhodium is on the list as well.

GOLD:Gold is the oldest precious metal known to man and for thousands of years it has been valued as a global currency, a commodity, an investment and simply an object of beauty. Major Characteristics: Gold is unique as it is both a commodity and a monetary asset. Its stability and high value makes it virtually indestructible and ensures that it is almost always recovered and recycled. There is no true consumption of gold in the economic sense as the stock of gold remains essentially constant while ownership shifts from one party to another. Although gold mine production is relatively inelastic, recycled gold (or scrap) ensures there is a potential source of easily traded supply when needed, and this helps to stabilize gold price. Economic forces that determine the price of gold are different from, and in many cases opposed to the forces that influence most financial assets.

Reasons for Choosing Gold as an investment:Page | 8

1. Global Currency Debasement: -

The U.S. dollar is fundamentally and technically very weak and should fall dramatically over the next few years. However, other countries are very reluctant to see their currencies appreciate and are resisting the fall of the U.S. dollar. Thus, we are in the early stages of a massive global currency debasement which will see tangibles, and most particularly gold, rise significantly in price.
2. Rising Investment Demand: -

When the crowd recognizes what is unfolding, they will seek an alternative to paper currencies and financial assets and this will create an enormous investment demand for gold. Own both the physical metal and select mining shares.
3. Alarming Financial Deterioration in the U.S: -

In the space of two years, the federal government budget surplus has been transformed into a yawning deficit, which will persist as far as the eye can see. At the same time, the current account deficit has reached levels, which has portended currency collapse in virtually every other instance in history.
4. Negative Real Interest Rates in Reserve Currency (U.S. Dollar): -

To combat the deteriorating financial conditions in the U.S., interest rates have been dropped to rock bottom levels, real interest rates are now negative and, according to statements from the Fed spokesmen, are expected to remain so for some time. There has been a very strong historical relationship between negative real interest rates and stronger gold prices.
5. Dramatic Increases in Money Supply in the US and Other Nations

Authorities are terrified about the prospects for deflation given the unprecedented debt burden at all levels of society in the U.S. Fed Governor Ben Bernanke is on record as saying the Fed has a printing press and will use it to combat deflation if necessary. Other nations are following in the U.S.'s footsteps and global money supply is accelerating. This is very gold friendly.

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6. Existence of a Huge and Growing Gap between Mine Supply and Traditional

Demand: Mined gold is roughly 2,500 tons per year and traditional demand (jewelry, industrial users, etc.) has exceeded this by a considerable margin for a number of years. Some of this gap has been filled by recycled scrap but central bank gold has been the primary source of above-ground supply.
7. Mine Supply is Anticipated to Decline in the next Three to Four Years: -

Even if traditional demand continues to erode due to ongoing worldwide economic weakness, the supply/demand imbalance is expected to persist due to a decline in mine supply. Mine supply will contract in the next several years, irrespective of gold prices, due to a dearth of exploration in the post Bre-X era, a shift away from high grading which was necessary for survival in the sub-economic gold price environment of the past five years and the natural exhaustion of existing mines.
8. Large Short Positions: -

To fill the gap between mine supply and demand, Central Bank gold has been mobilized primarily through the leasing mechanism, which facilitated producer hedging and financial speculation. Strong evidence suggests that between 10,000 and 16,000 tons (3050% of all Central Bank gold) is currently in the market. This is owed to the Central Banks by the bullion banks, which are the counter party in the transactions.
9. Low Interest Rates Discourage Hedging: -

Rates are low and falling. With low rates, there isn't sufficient contagion to create higher prices in the out years. Thus there is little incentive to hedge and gold producers are not only hedging, they are reducing their existing hedge positions, thus removing gold from the market.
10.

Rising Gold Prices and Low Interest Rates Discourage Financial Speculation

on the Short Side: When gold prices were continuously falling and financial speculators could access Central Bank gold at a minimal leasing rate (0.5 - 1% per year), sell it and reinvest the proceeds in a high yielding bond or Treasury bill, the trade was viewed as a lay-up.
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Everyone did it and now there are numerous stale short positions. However, these trades now make no sense with a rising gold price and declining interest rates.
11.

The Central Banks are Nearing an Inflection Point when they will be

Reluctant to Provide more Gold to the Market: The Central Banks have supplied too much already via the leasing mechanism. In addition, Far Eastern Central Banks who are accumulating enormous quantities of U.S. Dollars are rumored to be buyers of gold to diversify away from the U.S. Dollar.
12.

Gold is Increasing in Popularity: -

Gold is seen in a much more positive light in countries beginning to come to the forefront on the world scene. Prominent developing countries such as China, India and Russia have been accumulating gold. In fact, China with its 1.3 billion people recently established a National Gold Exchange and relaxed control over the asset. Demand in China is expected to rise sharply and could reach 500 tons in the next few years.
13.

Gold as Money is Gaining Credence: -

Islamic nations are investigating a currency backed by gold (the Gold Dinar), the new President of Argentina proposed, during his campaign, a gold backed peso as an antidote for the financial catastrophe which his country has experienced and Russia is talking about a fully convertible currency with gold backing.
14.

Rising Geopolitical Tensions : -

The deteriorating conditions in the Middle East, the U.S. occupation of Iraq, the nuclear ambitions of North Korea and the growing conflict between the U.S. and China due to China's refusal to allow its currency to appreciate against the U.S. dollar headline the geopolitical issues, which could explode at anytime. A fearful public has a tendency to gravitate towards gold.
15.

Limited Size of the Total Gold Market Provides Tremendous Leverage : -

All the physical gold in existence is worth somewhat more than $1 trillion U.S. Dollars while the value of all the publicly traded gold companies in the world is less than $100 billion US dollars. When the fundamentals ultimately encourage a strong flow of capital

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towards gold and gold equities, the trillions upon trillions worth of paper money could propel both to unfathomably high levels.

STOCK MARKET:A stock market or equity market is a public entity for the trading of company stock (shares) and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately. The stocks are listed and traded on stock exchanges which are entities of a corporation or mutual organization specialized in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together. STOCK:A stock is a certificate that shows that you own a small fraction of a corporation. When you buy a stock, you are paying for a small percentage of everything that company owns, buildings, chairs, computers, etc. When we own a stock, you are referred to as a shareholder or a stockholder. In essence, a stock is a representation of the amount of a company that you own. The benefit of owning stock in a corporation is that whenever the corporation profits, you profit as well. For example, if you buy stock in Coca Cola, and they come out with a new drink that everyone buys in massive quantities, then the company will profit tremendously, and so will you. A stock also gives you the right to make decisions that may influence the company. Each stock you own has a little bit of voting power, so the more stocks you own, the more decision making power you have. In order to vote, you must either attend a corporate meeting, or you fill out a proxy ballot. A proxy ballot is a "substitute" for your absence at the corporate meeting. A ballot is a series of proposals that you may either vote for or against. Common questions are who should be on the board of directors, and whether or not to issue additional stock. You can profit more by making smart decisions, such as voting for a smarter board of directors. Also, if you think that issuing additional stock may increase the value of the stock, then you would vote for issuing additional stock.

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INDIAN STOCK MARKET:The Bombay Stock Exchange is the oldest exchange in Asia. It traces its history to the 1850s, when 4 Gujarati and 1 Parsi stockbroker would gather under banyan trees in front of Mumbai's Town Hall. The location of these meetings changed many times, as the number of brokers constantly increased. The group eventually moved to Dalal Street in 1874 and in 1875 became an official organization known as 'The Native Share & Stock Brokers Association'. In 1956, the BSE became the first stock exchange to be recognized by the Indian Government under the Securities Contracts Regulation Act. The Bombay Stock Exchange developed the BSE SENSEX in 1986, giving the BSE a means to measure overall performance of the exchange. In 2000 the BSE used this index to open its derivatives market, trading SENSEX futures contracts. The development of SENSEX options along with equity derivatives followed in 2001 and 2002, expanding the BSE's trading platform. Historically an open outcry floor trading exchange, the Bombay Stock Exchange switched to an electronic trading system in 1995. It took the exchange only fifty days to make this transition. This automated, screen-based trading platform called BSE On-line trading (BOLT) currently has a capacity of 8 million orders per day. The BSE has also introduced the world's first centralized exchange-based internet trading system, BSEWEBx.co.in to enable investors anywhere in the world to trade on the BSE platform. Shares in the Stock Market are either traded through :(a) Stock Exchange:-These are organized market places where stocks, bonds are other

equivalents are traded between the buyers and sellers where exchange acts as a counter-party to both the participants in case of any default.

(b)Over-the -Counter (OTC):- These are not centralized exchanges and the trade takes

place through a network of dealers.

Basically, Stock Market can be divided into two parts :-

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1. Primary Market It is the market where new issues of securities are offered to the investors. 2. Secondary Market An investor of a secondary market buys a security from another participant of Market). the same and not from any issuing corporation (as in case of Primary

SENSEX : The Barometer of Indian Capital Markets SENSEX, first compiled in 1986, was calculated on a "Market CapitalizationWeighted" methodology of 30 component stocks representing large, well established and financially sound companies across key sectors. The base year of SENSEX was taken as 197879. SENSEX today is widely reported in both domestic and international markets through print as well as electronic media. It is scientifically designed and is based on globally accepted construction and review methodology. Since September 1, 2003, SENSEX is being calculated on a free-float market capitalization methodology. The "free-float market capitalizationweighted" methodology is a widely followed index construction methodology on which majority of global equity indices are based; all major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the free-float methodology. The growth of the equity market in India has been phenomenal in the present decade. Right from early nineties, the stock market witnessed heightened activity in terms of various bull and bear runs. In the late nineties, the Indian market witnessed a huge frenzy in the 'TMT' sectors. More recently, real estate caught the fancy of the investors. SENSEX has captured all these happenings in the most judicious manner. One can identify the booms and busts of the Indian equity market through SENSEX. As the oldest index in the country, it provides the time series data over a fairly long period of time (from 1979 onwards). Small wonder, the SENSEX has become one of the most prominent brands in the country.

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Indian Stock Market Trends;How do shares prices fluctuate in stock market

Stock Market is synonymous with the word gambling for both the experts as well as beginners. It is highly advisable to understand the functioning of the stock market before making any transaction or investment. And this can be easily accomplished by performing quality research, paying heed to experts opinion and proper consideration to the trends and tactics of the market. It is very important to learn the technique of buying and selling the shares with the perfect sense of timing in order to earn huge profits. The companies offer their shares to the public, so that the interested investors can participate and buy their shares. The process of buying and selling of stock is executed in Stock Exchange. However this is just an outlay or a framework of the stock market. The real game starts with the tactics and strategies that are used by the investors. And for this, you may have to learn many new economic terms used to explain the moods of the stock market. First and foremost vital step is to understand the trends of the market, often termed as market movements. There are adequate patterns, following which the stocks and supplies rise and fall. The reason could be anything from spoilt reputation of a firm to the infamy name of the company, which is not necessary to be noted. Whats important here is to concentrate on the time as in when the value of a share is rising and when it is going down. When the value is touching sky, it is best to sell the shares so that you can make big gains. Timing rules the stocks merchandising. Proper understanding of the trends can only be earned by experience and focus. And once you are clear with market trends you can easily manage your investments with right timing. Another is the stock trading systems. Nowadays many software companies provide valuable information on stock trading systems. Through this the investors can understand and manage the trends of many stocks. They can even seek assistance to know how profitable it will be to invest in a particular company. These trading systems are available with many shares that are costeffective if invested in, letting you free from the extra burden of work. But dont forget before starting trading or investing in Indian stock market you need to do your homework as in proper research is required.
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Reason behind the stock market fluctuations:Theses fluctuations occur partly because companies make money, or lose money, but it is much more involved than that. A stock is only worth what someone will pay for it. Usually, if a company makes a lot of money, its value rises, because people are willing to pay more for a company's stock if the company is doing well. There are many other factors that affect the value of stocks. One example is interest rates, or the amount of money you have to pay a bank to loan money, or how much it has to pay you to keep your money in their bank. If interest rates are high, stock prices generally go down, because if people can make a decent amount of money, by keeping their money in banks, or buying bonds, they feel like they should not take the risk in the stock market. Many other factors have an effect on the stock market- for example, the state of the economy. If there is more money floating around, there is more flowing into companies making their prices rise. Yet another factor is time of year, and publicity. Many stocks are seasonal, meaning they do well during certain parts of the year, and worse during others. An example is an ice company, the ones that package ice that you buy at the supermarket. During the summer, with picnics, and sweltering heat, their product sells well, and thus their stock price goes up; But during the winter, when people are not as interested in a picnic with 20 below temperatures, their price goes down. Publicity has an effect on stock prices. If an article comes out saying that company ABC, has just invented this new type of ice that will revolutionize the industry, odds are their price will increase. Conversely, if an article comes out saying that company ABC's president is a crook, and stole the pension funds, it is a good bet that the price will go down.

LEVEL OF STOCK:There are four levels of stock you can purchase.

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Penny Stocks:The lowest level of stock is the penny stocks. Penny stocks are small companies that have almost no chance of making it big, and they are usually of no value. These stocks could be a local chain of stores, or a company that does not provide anything desirable. Growth Stocks:Growth stocks are new companies that have a lot of potential for success, but they are not stable, and do not always become successful. These growth stocks are not always a safe investment, since they are not well- established. Secondary issues are well- established businesses that are almost totally insured to continue growing in strength. They are a good investment, since the profit can increase a lot, but finding the companies can be hard. Secondary Issue Stocks:Companies that have an established trading history with a verifiable track record are referred to as secondary stocks. The advantage to buying shares in these companies is that you can look at the past performance of the company to determine if it has a reliable history. It also helps you determine how well the company fits into your overall trading strategy. Companies with slow growth will not fit into a high-risk strategy, just as companies with performance spikes will not fit well into a conservative strategy. Looking at the historical data that is available with secondary issue stocks will help you determine precisely how valuable a stock will be to your portfolio.

Blue chip Stocks:The highest levels of stocks you can buy are blue chip stocks. The older companies usually are blue chip, such as International Business Machines (IBM) and Coca Cola. These blue chip stocks are the safest investment you can make, but they also take a lot more time to profit with. The oldest and most reliable stocks on the market are referred to as blue chip investments. The downside is that the size of the company and the popularity of its shares often drive up the
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prices of blue chip stocks, so they are not as affordable as other companies. However, what money can be put into these businesses is considered to be a wise investment. TYPES OF STOCK There are two basic types of stock i.e. Common stock and Preferred stock. Both types of stock have their pros and cons, so before buying a corporations stock, you must decide which one pleases you most. Common Stock:A common stock is the basic stock a corporation issues. It just shows that you own a fraction of the company. The common stocks are directly influenced by failures and successes of the company. Common stocks are more of a gamble. Since there is a higher chance of making profit, common stock owners are issued their dividends or profits after the preferred stock. Preferred Stock:After all the common stock has been issued, companies begin to distribute preferred stock. The preferred stock owners are given their dividends before the common stock owners are. Also, if the company goes out of business, and liquidates, the preferred stock owners are paid back the money they invested before the common stockholders are reimbursed. The main drawback of preferred stocks is that they cannot benefit as much from company profits because they are only paid a fixed dividend payment. There are also classes of preferred stock. These different classes are often labeled A, B, C and so on. The different classes usually have different market prices, restrictions, and dividend payments. When no one is buying a stock because of a high price, companies will often issue a stock split. When they issue a stock split, a company gives you more stock for your money. They simply distribute more stocks, and decrease the price for a stock. This just allows someone who doesn't have as much money to invest in a company. If you own stock in a company that splits two for one, you would get twice the amount of stocks that you had before, but each stock will have
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decreased in value by fifty percent. Stocks can split into any number, but they can also reverse split which means that the stocks double in value, but you only get to keep half the stocks you had before. In either split, you do not lose any money. It is just like trading in two five dollar bills for one ten dollar bill, or vice versa.

BUYING AND SELLING STOCK The first step when buying stocks is to decide what company to buy stock in. You can buy stock in any publicly held corporation, which means that the public can control the corporation. You cannot buy stock in a privately held or closely held corporation, which are corporations that are controlled either by a small group of individuals or by close friends and family. Fortunately, most of the larger companies are publicly held, and you can buy from them. When selecting a company to invest in, you should make sure they are in a strong industry, and make sure the company is strong or growing. For example, Coca Cola Enterprises is a large company that is one of the strongest in the soft drinks industry. This would make it a good stock to invest in, although finding a newer company that is growing rapidly might get you more profits quicker. Choosing the company to invest in is no easy job, and there are many different methods people have come up with to select one. Fundamental analysis is one method, in which you study the company's current management and position in the market. Technical analysis is another method which is totally based on charts, in which you identify trends the company has, and invest accordingly. One popular method is just throwing darts at the stock page, which often beats out all the other methods. After you decide what company to invest in, you need to find a broker. A broker is the only person that can make an order to buy or sell stocks. There are two types of brokers that every brokerage firm has. The first type of broker is a stockbroker, who researches investments, helps make goals, and give advice on investing. Discount brokers on the other hand, do not offer advice, and they do no research. They just are middle men in the transactions. When you give a stockbroker your order, they relay the order to the floor brokers. The floor brokers do all the actual buying and selling, and they hold a seat on the exchange.
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After you find a broker and buy the stocks, the broker does the rest of the work. You just have to call him up and place an order with him. The most basic order is the market order, where you just ask the broker to buy or sell your stocks at the best price he can get his hands on. Another type of order which takes more research and predicting on your part is a limit order. In a limit order, you tell the broker to trade only when the stock is at a certain price or better. A stop order is an order which can save you from extreme loss. In a stop order, you tell the broker to sell your shares if the stock drops too low, and you tell him the price not to let it drop below. TRACKING OF STOCK To track how your stocks are doing, you have to look at stock listings. Stock listings are published in just about every newspaper. The listings look confusing at first, since they look like a mixture of numbers, but can be a very useful tool when tracking your stock's progress. The listings are organized into many columns, including the following information:52 weeks high and low- This field is a good indicator about stocks volatility. Volatility is an indicator of the riskiness and potential for profit that the stock has. The greater the difference between the high and low, the riskier the stock is for loss and gain. If the difference between the high and low is small, then there is little potential for either loss or gain. Company name - This field is usually abbreviated in the listings, and listed alphabetically. Symbol - This field is a one to four character symbol used as a sort of nickname for the company. Dividend - This field is listed in dollar format, and it is the cash amount of money that the company will pay you each year for each stock. Percent yield - This field is calculated by dividing the dividend by the closing price. It just tells you how much of the price of the stock you will be paid in dividends each year. PE ratio - The price-earnings ratio calculates the relationship between the price of a company's stock, and the annual earnings of a company. It is calculated by dividing the closing price of the stock by the earnings per share of each stock.
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Volume - The volume is the amount of stocks that were traded the day before. This number is given in hundreds, so to get the actual number of stocks traded, multiply the number in that field by one hundred. If a small is before the number, then the volume is not given in hundreds, and is the actual number of stocks traded. High, low and close - These are the highest and lowest prices of the stock the day before, and the closing price for the day before. This is an indicator of how much the price of the stock fluctuated throughout the previous day. Net change - This is the change of the price of the stock from the previous day. This gives you an idea whether the price is dropping or rising. In addition to the stock listings, stock price charts can sometimes offer a better view of how the stock is doing. The price charts graphically organize the value of the stock over time. The charts can give you information on the company's historical performance, the stock's stability or volatility, the stock's current price relative to the past, and the stock's growth rate.

1.2 Conceptual Framework Marketing management 1 2e-Analysing consumer markets by Philip Kotler states that perceptions are more important than reality and it affects the consumer actual behavior.
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Perception is defined as the process by which an individual selects, organizes and interprets information puts to create a meaningful picture of the world. Bankers, central bankers and governments see currencies as having far superior usefulness than gold due to the control it allows over the monetary system. This cannot be overemphasized. If currencies were anchored to gold, all such controls would become entirely visible. This would not be in the interests of either confidence in money or in bankers/politicians. Long ago. But their actions do not exclude gold from being money. You can't remove it from the monetary system as we have seen so vividly in the last decade, whether bankers or politicians like it or not. In Asia it is real money and always will be. In the developed world, confidence in the monetary system is waning. Once China has matured to the point that its money becomes a global reserve asset, then the dollar will wane quickly. After the rollercoaster ride of recent years, nearly all High Net Worth Investors (HNWIs) say capital preservation is important to them, and a large number say it is extremely important. Similarly, effective portfolio management is deemed important by of HNWIs. The crisis has not only made these needs more acute, it has raised or created the priority for newer issues, including specialized advice and transparency on statements and fees. An investment objective will typically not be completed by the investor until he or she has decided to use the services of the asset manager because this information is highly sensitive and is kept confidential. Portfolio managers will use the information obtained in an investment objective form to help create a customized portfolio within the client's risk profile. This form will be kept current as the client's goals change over the years, with new information being implemented into the client's portfolio and/or retirement plan.

1.3 Literature Review

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Famma and French (1989) and Poterba and summers (1988) have shown that the U.S. stock returns have a mean reverting tendency and can be predictable to some extent. Similar results have been fousnd by MacDonald and Power (1991) that have a mean reverting-tendency and so can be predicted. Subsequent studies like Famma (1981), Famma and Gibbons (1982) Summers (1986) and Chen (1991) verified that the efficient market hypothesis holds in US market, and there was significant linkage between US stock market on one hand and real economic variables, such as, GDP, industrial production, inflation and unemployment on the other hand. Naj and Rahman (1991) studied the relationship between volatility of stock return and of macroeconomic variables in four developed countries and confirmed the relationships. Fang and Lee (1990) studied the long term relationships between stocks return on the one hand and GNP, inflation and money supply on the other in Taiwan and concluded that the efficient market hypothesis is not valid for an emerging market. Fang and Loo (1995) studied the relationship between stock return volatility and international trade for four Asian countries. They however, found evidence in favor of the efficient market hypothesis. Their empirical results based on vector autoregressive model (VAR) suggested that the stock return volatility in the four markets respond to information on trade. The behavior of stock price (BSE) in relation to some key macro economic variables in India during the scam period 1992 was studied by Bhattacharya and Chakravarty (1994). Their dynamic forecasts indicate that the behavior of stock price is unrelated to key macro variables. Mukherjee and Naka (1995) explored the relationship between exchange rate, inflation, money supply, real economic activity, long-term government bond rate and call money rate with the Japanese stock market. Their empirical result suggested that co integration relation existed and positive relationship was found between the Japanese industrial production and stock return. Chaudhuri and Koo (2001) investigated the volatility of stock returns in some Asian emerging markets in terms of the volatility of domestic and external factors, found that both domestic macroeconomic variables and international variables have significant impact on stock return volatility. Their empirical results suggest the presence of a significant contagion
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U.K. stock returns

effect and integration of capital market in this region. The results also suggested the role of government in terms of fiscal and monetary policy in smooth functioning of the stock market is crucial in this region. In Indian context, Bhattacharya and Mukherjee (2002) studied the nature of the causal relationship between stock prices and macro aggregates in India by using the methodology proposed by Toda and Yamamoto for the period of 1992-93 to 2000-2001.Their results show that there is no causal relationship between stock price and macro economic variables like money supply, national income and interest rate but there exists a two way causation between stock price and rate of inflation. According to them index of industrial production lead the stock price. They further investigated the causal linkage between stock prices and macroeconomic aggregates in the foreign sector in India like exchange rate, foreign exchange reserves and value of trade balance by applying the technique of co integration and long run Granger non-causality test developed by T&Y (1995). Their results suggested that there is no causal linkage between stock price and the three variables. Thus BSE sensitive index neither leads these three variables nor do they lead the BSE sensitive index. They also added that if these types of results hold for subsequent periods then it can be said that Indian stock market is approaching towards informational efficiency with the three variables, i.e. exchange rate, foreign exchange reserves and trade balance. Granger non-causality test by Toda and Yamamoto (1995) (T&Y) for the period of April 1991 to December2005.The causal relationship tested between the BSE index and important key macroeconomic variable such as gold prices. Gold price is included in the model as an additional variable, to examine whether gold price contain any additional significant information about price movements. Since gold is an important saving instrument in India and is very often used as a hedge against inflation, it is expected that gold may be looked upon as alternative asset for those holding idle money, for speculative purposes.

1.4 Objectives

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To study the relationship between the stock market and commodity market.
To study factors or forces influencing perception of investors towards causal relation of

gold prices with SENSEX returns. To study of decision making process. To study criteria of buying decision and selling decision of the investors.

1.5 Industry Analysis The term investment industry is often inter-changeable with similar terms, such as investment services industry, investment management industry, or asset, money or wealth management
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industry. All terms share a core definition about what essentially such an industry does -providing investment advisory and investment management to investor clients. Other labels, like securities industry or financial services industry, are more broadly defined, encompassing investment banking firms serving also corporate issuers or commercial banks by mainly providing many non-investment-type financial services. Investment industry analysis can be useful for both investment services providers and the general investing public. Main Components Many entities are directly or indirectly involved in the investment industry providing the basic industry frameworks, such as stock exchanges, discount brokers, securities custodial banks and various financial technology supporting companies. But the main components of the investment industry are investment advisors and investment management companies. Investment advisors provide investment advisory and portfolio management services on how and where to direct clients' investment resources. Investment management companies are the various investment fund providers, including Exchange-Traded Funds, called ETFs, that receive money from investors and make actual investments. Industry Competition While competition among investment advisors has continued to favor independent, smaller advisors over large financial institutions, competition among investment management companies has been moving in the opposite direction with large percentages of investment assets increasingly concentrated in the few largest fund companies. Providing investment advisory, large financial institutions often find themselves subject to potential conflict of interest as seen by their investor clients, as many of them also run in-house investment fund management businesses. On the other hand, smaller, independent investment advisors would be more likely to recommend the best investment funds for their clients, as advisors themselves are not in the investment fund business.

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Investor Demand The investment industry has seen increased use of investment advisory services over the years due to the increased complexity in the financial markets and volatile investment performances in many asset classes. The investment-management part of the industry has also seen increased investor demand especially as the idea of investing retirement savings has grown popular over time. According to a 2006 research report by the Investment Company Institute, there are 90 million mutual fund investors in the United States, around one-third of its population, and fund companies manage about 20 percent of household financial assets. Moreover, more investors are demanding on investing in funds that are low-cost management and have above-average performances. Investment Regulations The investment industry is heavily regulated both at the federal and state level. Two main regulations that govern investment advisors and investment companies, respectively, are the Investment Advisers Act of 1940 and the Investment Company Act of 1940. Investment advisors must pass a series of exams and register with the Securities and Exchange Commission or appropriate state authorities. To protect the investing public, governments require investment companies of both initial registration and ongoing filing with their designated agencies. Certain regulations also limit investment companies' ability to undertake highly risky strategies, such as shorting selling borrowed securities or using borrowed funds as leverage.

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1.6 Rationale of Study BSE Sensex of the Indian market is very sensitive; there is a high rate of rise and fall of the market index, which can be easily seen. In order to find out the reason of this sensitivity of the market I have decided to find out the impact of GOLD on the BSE Sensex. Gold trading has the ability to provide investors a less volatile market. Most traders find that the gold market allows them to diversify their portfolio and add to their long or short term investment goals. It also provides the ability to trade with different qualities and various prices. The futures market using the gold commodity has become quite popular due to it being a leveraged product. Many investors will partake in trading gold futures contracts; these represent a secure contract with the idea to buy or sell, give or take delivery of a precise quantity of gold or bouillon in addition to the actual quality of the gold or bouillon, on a specific arranged date, as well as at a fixed arranged price. Traders can easily choose to receive the actual underlying asset (in this case gold), or give it, on the maturity date of the contract. This is very unlikely however when trading with futures contracts, and instead is geared at the underlying asset market prices and speculating on what the market will do in the future. This speculation makes gold future market trading very volatile.

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Chapter 2

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2. Research Methodology

The word research methodology comes from the word advance learners dictionary meaning of research as a careful investigation or inquiry especially through search for new facts in any branch of knowledge for example some authors have defined research methodology as systematized effort to gain new knowledge. Research is an original contribution to the existing stock of knowledge making for its advancement it is the pursuit of the truth with the help of the study, observations, comparison and experiment. 2.1 Research Design A research design is a type of blueprint prepared depending on various types of blueprints available for the collection, measurement and analysis of data. A research design calls for developing the most efficient plan of gathering the needed information. Research design is the specification of methods and procedures for acquiring the information needed. We studied of the two points: Descriptive Data Conceptual Data

The Study: It is a descriptive and conclusive research based on data collected from investors.It has a pre decided objective which will give conclusion after its completion. Questionnaire is used to conduct the research. The research is conducted in Indore city only. Limitation of this research: It is conducted in Indore city only. The study is confined to stock price and precious metal only.

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The Sample:100 investors have been selected on non-probability. It was on convenient basis. Sample is broken into the following classification: 1. On the basis of age. 2. On the basis of Marital status 3. On the basis of Education level. 4. On the basis of Occupation: Government employee, Private employee, Self employed and Professional. 5. On the basis of Annual Income: Below 2,50,000 2,50,000-4,00,000 4,00,000-5,50,000 8,00,000 and above. The Tools:1. Tool for Data Collection:-

Primary method of data collection was used to get first hand information. Questionnaire was used to collect information from consumer. Information was related to investors perception towards investing in stock market and commodity market concerning their prices.
2. Tool for Data Analysis:-

Statistics were used to analyze data. Google doc spreadsheet was used to compute these statistics. Statistical techniques used for the analysis are: Variance Covariance Correlation Factor analysis for data interpretation..

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FACTS & FINDINGDS

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Q. What percentage of your monthly household income could be available for savings?

Q, How much for your monthly income is available for investment?

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Q. Your preferred area of investment is?

Q. In which sector do you prefer to investment your money?

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Q. What is your purpose behind investment?

Q. How much importance do you give to your investment objective?

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Q. How did you know about various stock market plan and gold price?

Q. Whom do you consult to, before investing in Stock or Gold?

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Q. Since when are you investing in financial instruments?

Q. What is the structure of your Portfolio?

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Q. When do you think to divest your investment?

Q. Why you divest your investment?

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SECONDARY DATA ANALYSIS :SECONDARY DATA:These data are already exists which has been collected by some other or organization for their use and is generally made available to other researcher for free or at a concessional rate The data used from 1july2010 to 30june2011. The sample is selected from the following sources: The daily closing prices of the equity shares were obtained from the website of the Bombay Stock Exchange (BSE) www.bseindia.com The daily fluctuations in the gold prices were obtained from the website www.mcxindia.com

2.3 Tools for Data Analysis

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Return: Return on an investment/asset for a period from 1july2010 to 30 june2011, consists of annual income (dividend) receivable plus change in market price. Mean Return:Mean is the arithmetic average of all the values in a data set. If there are 'N' elements of data, (Xi) in the data set, then the mean (X) is given by X = Xi/N, where, i = 1, 2, 3,..., n

Variance:Variance ( r 2) on the other hand, equals to average of squares of deviations of individual returns (Ri) from expected returns E (Ri). Symbolically,

= [Ri E(Ri)] 2 / N

Standard Deviation:Standard deviation ( r ), is the most common statistical measure of risk asset from the expected value of return. It measures the fluctuations mean returns. It represents the square root of average squared deviations individual returns (Ri) from the expected return E (Ri). Symbolically,

r = [Ri E(Ri)] 2 / N

Co-variance:Page | 40

Covariance describes the nature of relationship between two variables. For instance, it may be the relationship between return on a security and the return on Market portfolio or may be the relationship between two securities etc. If X and Y are two securities, then the covariance between the two securities is given by the following formula:

COVXY = (xi -`x)(yi -`y) / N-1

where i = (1, 2, 3,..,n)

When two securities are combined, if rates of return of two securities move together, their interactive risk/covariance is said to be positive and vice versa. If rates of return are independent, then the covariance is zero.

Co-relation coefficient:Correlation coefficient describes the degree of relationship between the two variables under consideration. It is given be the equation

= Cov (X, Y) / (

Where,

= Standard deviation of X ,

= Standard deviation of Y

Correlation is computed into what is known as the correlation coefficient, which ranges between -1 and +1. (+1 perfectly correlated, 0 uncorrelated and 1 perfectly negatively correlated Perfect positive correlation (a correlation co-efficient of +1) implies that as one security moves, either up or down, the other security will move in lockstep, in the same direction. Alternatively, perfect negative correlation means that if one security moves in either direction the security that is perfectly negatively correlated will move by an equal amount in the opposite direction. If the correlation is 0, the movements of the securities are said to have no correlation; they are completely random

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Above tools are used for the interpretation of Stock prices data and Gold prices data from 1July 2010 to 30June 2011. Data of Stock prices and Gold prices are below which is based on daily closing price of the market.

Date 30-Jun-11 29-Jun-11 28-Jun-11 27-Jun-11 24-Jun-11 23-Jun-11 22-Jun-11 21-Jun-11 20-Jun-11 17-Jun-11 16-Jun-11 15-Jun-11 14-Jun-11 13-Jun-11 10-Jun-11 9-Jun-11 8-Jun-11 7-Jun-11 6-Jun-11 3-Jun-11 2-Jun-11 1-Jun-11 31-May-11 30-May-11 27-May-11 26-May-11 25-May-11 24-May-11 23-May-11 20-May-11 19-May-11 18-May-11

Sensex Close 18,845.87 18,693.86 18,492.45 18,412.41 18,240.68 17,727.49 17,550.63 17,560.30 17,506.63 17,870.53 17,985.88 18,132.24 18,308.66 18,266.03 18,268.54 18,384.90 18,394.29 18,495.62 18,420.11 18,376.48 18,494.18 18,608.81 18,503.28 18,232.06 18,266.10 18,044.64 17,847.24 18,011.97 17,993.33 18,326.09 18,141.40 18,086.20

Return 0.0081 0.0108 0.0043 0.0094 0.0285 0.0100 -0.0006 0.0031 -0.0206 -0.0064 -0.0081 -0.0097 0.0023 -0.0001 -0.0063 -0.0005 -0.0055 0.0041 0.0024 -0.0064 -0.0062 0.0057 0.0148 -0.0019 0.0122 0.0110 -0.0092 0.0010 -0.0183 0.0101 0.0030 -0.0028

Gold Price Close 21,337.50 21,423.00 21,388.00 21,414.50 21,632.00 21,847.00 21,901.50 21,893.00 21,849.50 21,609.50 21,599.00 21,434.00 21,512.50 21,628.50 21,827.50 21,742.00 21,718.00 21,890.50 21,856.00 21,754.00 21,916.50 21,734.00 21,904.50 21,814.50 21,780.00 21,738.00 21,831.50 21,707.50 21,603.00 21,365.00 21,250.00 21,302.00

Retur n -0.0040 0.0016 -0.0012 -0.0101 -0.0099 -0.0025 0.0004 0.0020 0.0110 0.0005 0.0077 -0.0037 -0.0054 -0.0092 0.0039 0.0011 -0.0079 0.0016 0.0047 -0.0074 0.0084 -0.0078 0.0041 0.0016 0.0019 -0.0043 0.0057 0.0048 0.0111 0.0054 -0.0024 -0.0022
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17-May-11 16-May-11 13-May-11 12-May-11 11-May-11 10-May-11 9-May-11 6-May-11 5-May-11 4-May-11 3-May-11 2-May-11 29-Apr-11 28-Apr-11 27-Apr-11 26-Apr-11 25-Apr-11 21-Apr-11 20-Apr-11 19-Apr-11 18-Apr-11 15-Apr-11 13-Apr-11 11-Apr-11 8-Apr-11 7-Apr-11 6-Apr-11 5-Apr-11 4-Apr-11 1-Apr-11 31-Mar-11 30-Mar-11 29-Mar-11 28-Mar-11 25-Mar-11 24-Mar-11 23-Mar-11 22-Mar-11 21-Mar-11 18-Mar-11

18,137.35 18,345.03 18,531.28 18,335.79 18,584.96 18,512.77 18,528.96 18,518.81 18,210.58 18,469.36 18,534.69 18,998.02 19,135.96 19,292.02 19,448.69 19,545.35 19,584.31 19,602.23 19,470.98 19,121.83 19,091.17 19,386.82 19,696.86 19,262.54 19,451.45 19,591.18 19,612.20 19,686.82 19,701.73 19,420.39 19,445.22 19,290.18 19,120.80 18,943.14 18,815.64 18,350.74 18,206.16 17,988.30 17,839.05 17,878.81

-0.0114 -0.0101 0.0106 -0.0135 0.0039 -0.0009 0.0005 0.0168 -0.0141 -0.0035 -0.0247 -0.0072 -0.0081 -0.0081 -0.0050 -0.0020 -0.0009 0.0067 0.0181 0.0016 -0.0154 -0.0159 0.0223 -0.0098 -0.0072 -0.0011 -0.0038 -0.0008 0.0144 -0.0013 0.0080 0.0088 0.0093 0.0068 0.0250 0.0079 0.0120 0.0083 -0.0022 -0.0150

21,348.50 21,339.50 21,516.00 21,217.50 21,568.00 21,484.00 21,371.50 21,561.00 21,412.00 21,642.00 21,788.00 21,927.00 21,566.00 21,577.50 21,242.00 21,217.00 21,422.00 21,144.00 21,136.00 21,103.50 20,883.00 20,779.50 20,591.00 20,674.50 20,578.50 20,428.50 20,453.50 20,228.50 20,238.50 20,294.00 20,243.00 20,159.50 20,091.00 20,242.00 20,333.00 20,467.00 20,395.00 20,417.00 20,384.50 20,238.50

0.0004 -0.0082 0.0140 -0.0164 0.0039 0.0053 -0.0088 0.0069 -0.0107 -0.0067 -0.0064 0.0166 -0.0005 0.0157 0.0012 -0.0096 0.0131 0.0004 0.0015 0.0105 0.0050 0.0091 -0.0040 0.0047 0.0073 -0.0012 0.0111 -0.0005 -0.0027 0.0025 0.0041 0.0034 -0.0075 -0.0045 -0.0066 0.0035 -0.0011 0.0016 0.0072 0.0123
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17-Mar-11 16-Mar-11 15-Mar-11 14-Mar-11 11-Mar-11 10-Mar-11 9-Mar-11 8-Mar-11 7-Mar-11 4-Mar-11 3-Mar-11 1-Mar-11 28-Feb-11 25-Feb-11 24-Feb-11 23-Feb-11 22-Feb-11 21-Feb-11 18-Feb-11 17-Feb-11 16-Feb-11 15-Feb-11 14-Feb-11 11-Feb-11 10-Feb-11 9-Feb-11 8-Feb-11 7-Feb-11 4-Feb-11 3-Feb-11 2-Feb-11 1-Feb-11 31-Jan-11 28-Jan-11 27-Jan-11 25-Jan-11 24-Jan-11 21-Jan-11 20-Jan-11 19-Jan-11

18,149.87 18,358.69 18,167.64 18,439.48 18,174.09 18,327.98 18,469.95 18,439.65 18,222.67 18,486.45 18,489.76 18,446.50 17,823.40 17,700.91 17,632.41 18,178.33 18,296.16 18,438.31 18,211.52 18,506.82 18,300.90 18,273.80 18,202.20 17,728.61 17,463.04 17,592.77 17,775.70 18,037.19 18,008.15 18,449.31 18,090.62 18,022.22 18,327.76 18,395.97 18,684.43 18,969.45 19,151.28 19,007.53 19,046.54 18,978.32

-0.0114 0.0105 -0.0149 0.0145 -0.0084 -0.0077 0.0016 0.0118 -0.0144 -0.0002 0.0023 0.0344 0.0069 0.0039 -0.0305 -0.0065 -0.0077 0.0124 -0.0161 0.0112 0.0015 0.0039 0.0264 0.0151 -0.0074 -0.0103 -0.0146 0.0016 -0.0242 0.0196 0.0038 -0.0168 -0.0037 -0.0156 -0.0151 -0.0095 0.0075 -0.0021 0.0036 -0.0060

19,991.50 20,069.50 20,238.50 20,341.50 20,300.50 20,437.00 20,416.50 20,432.50 20,542.00 20,276.50 20,416.00 20,247.50 20,197.00 20,191.00 20,320.00 20,056.00 20,037.00 19,992.00 19,956.50 19,893.50 19,846.00 19,776.00 19,659.50 19,659.50 19,706.00 19,647.50 19,584.00 19,530.00 19,580.50 19,301.00 19,421.00 19,474.50 19,563.00 19,201.50 19,472.00 19,309.50 19,614.00 19,568.50 19,789.00 19,731.50

-0.0039 -0.0084 -0.0051 0.0020 -0.0067 0.0010 -0.0008 -0.0053 0.0130 -0.0069 0.0083 0.0025 0.0003 -0.0064 0.0131 0.0009 0.0022 0.0018 0.0032 0.0024 0.0035 0.0059 0.0000 -0.0024 0.0030 0.0032 0.0028 -0.0026 0.0144 -0.0062 -0.0028 -0.0045 0.0187 -0.0140 0.0084 -0.0156 0.0023 -0.0112 0.0029 -0.0024
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18-Jan-11 17-Jan-11 14-Jan-11 13-Jan-11 12-Jan-11 11-Jan-11 10-Jan-11 7-Jan-11 6-Jan-11 5-Jan-11 4-Jan-11 3-Jan-11 31-Dec-10 30-Dec-10 29-Dec-10 28-Dec-10 27-Dec-10 24-Dec-10 23-Dec-10 22-Dec-10 21-Dec-10 20-Dec-10 16-Dec-10 15-Dec-10 14-Dec-10 13-Dec-10 10-Dec-10 9-Dec-10 8-Dec-10 7-Dec-10 6-Dec-10 3-Dec-10 2-Dec-10 1-Dec-10 30-Nov-10 29-Nov-10 26-Nov-10 25-Nov-10 24-Nov-10 23-Nov-10

19,092.05 18,882.25 18,860.44 19,182.82 19,534.10 19,196.34 19,224.12 19,691.81 20,184.74 20,301.10 20,498.72 20,561.05 20,509.09 20,389.07 20,256.03 20,025.42 20,028.93 20,073.66 19,982.88 20,015.80 20,060.32 19,888.88 19,864.85 19,647.77 19,799.19 19,691.78 19,508.89 19,242.36 19,696.48 19,934.64 19,981.31 19,966.93 19,992.70 19,850.00 19,521.25 19,405.10 19,136.61 19,318.16 19,459.85 19,691.84

0.0110 0.0012 -0.0169 -0.0181 0.0174 -0.0014 -0.0240 -0.0247 -0.0057 -0.0097 -0.0030 0.0025 0.0059 0.0065 0.0115 -0.0002 -0.0022 0.0045 -0.0016 -0.0022 0.0086 0.0012 0.0110 -0.0077 0.0054 0.0093 0.0138 -0.0233 -0.0120 -0.0023 0.0007 -0.0013 0.0072 0.0167 0.0060 0.0139 -0.0094 -0.0073 -0.0119 -0.0134

19,778.50 19,682.50 19,756.50 19,846.50 19,826.00 19,771.50 19,739.00 19,672.00 19,814.00 19,923.50 20,134.00 20,211.50 20,099.00 20,180.00 20,134.00 19,998.00 20,031.00 19,943.00 19,866.00 19,956.00 19,978.50 20,005.00 19,990.50 19,979.00 20,111.00 19,996.50 19,975.50 19,962.50 20,046.00 20,274.00 20,233.50 20,014.50 19,984.50 19,973.00 19,902.50 19,929.50 19,954.50 19,938.50 19,999.50 19,834.00

0.0049 -0.0038 -0.0045 0.0010 0.0028 0.0016 0.0034 -0.0072 -0.0055 -0.0105 -0.0038 0.0056 -0.0040 0.0023 0.0068 -0.0016 0.0044 0.0039 -0.0045 -0.0011 -0.0013 0.0007 0.0006 -0.0066 0.0057 0.0011 0.0007 -0.0042 -0.0113 0.0020 0.0109 0.0015 0.0006 0.0035 -0.0014 -0.0013 0.0008 -0.0031 0.0083 0.0085
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22-Nov-10 19-Nov-10 18-Nov-10 16-Nov-10 15-Nov-10 12-Nov-10 11-Nov-10 10-Nov-10 9-Nov-10 8-Nov-10 5-Nov-10 4-Nov-10 3-Nov-10 2-Nov-10 1-Nov-10 29-Oct-10 28-Oct-10 27-Oct-10 26-Oct-10 25-Oct-10 22-Oct-10 21-Oct-10 20-Oct-10 19-Oct-10 18-Oct-10 15-Oct-10 14-Oct-10 13-Oct-10 12-Oct-10 11-Oct-10 8-Oct-10 7-Oct-10 6-Oct-10 5-Oct-10 4-Oct-10 1-Oct-10 30-Sep-10 29-Sep-10 28-Sep-10 27-Sep-10

19,957.59 19,585.44 19,930.64 19,865.14 20,309.69 20,156.89 20,589.09 20,875.71 20,932.48 20,852.38 21,004.96 20,893.57 20,465.74 20,345.69 20,355.63 20,032.34 19,941.04 20,005.37 20,221.39 20,303.12 20,165.86 20,260.58 19,872.15 19,983.13 20,168.89 20,125.05 20,497.64 20,687.88 20,203.34 20,339.89 20,250.26 20,315.32 20,543.08 20,407.71 20,475.73 20,445.04 20,069.12 19,956.34 20,104.86 20,117.38

0.0188 -0.0175 0.0033 -0.0221 0.0076 -0.0212 -0.0138 -0.0027 0.0038 -0.0073 0.0053 0.0207 0.0059 -0.0005 0.0160 0.0046 -0.0032 -0.0107 -0.0040 0.0068 -0.0047 0.0194 -0.0056 -0.0093 0.0022 -0.0183 -0.0092 0.0237 -0.0067 0.0044 -0.0032 -0.0111 0.0066 -0.0033 0.0015 0.0186 0.0056 -0.0074 -0.0006 0.0036

19,665.50 19,648.50 19,613.00 19,627.50 19,609.50 19,697.50 19,882.50 19,850.50 19,827.50 19,588.50 19,487.00 19,300.00 19,276.50 19,281.00 19,362.00 18,950.50 18,868.00 18,940.00 18,955.50 19,090.50 18,941.00 19,176.50 19,011.50 19,384.50 19,209.00 19,343.50 19,475.00 19,302.50 19,182.00 19,132.00 18,870.50 19,186.00 19,100.50 18,917.00 18,744.50 18,729.50 18,806.50 18,823.50 18,621.50 18,716.00

0.0009 0.0018 -0.0007 0.0009 -0.0045 -0.0093 0.0016 0.0012 0.0121 0.0052 0.0096 0.0012 -0.0002 -0.0042 0.0215 0.0044 -0.0038 -0.0008 -0.0071 0.0079 -0.0124 0.0086 -0.0194 0.0091 -0.0070 -0.0068 0.0089 0.0063 0.0026 0.0138 -0.0166 0.0045 0.0097 0.0092 0.0008 -0.0041 -0.0009 0.0108 -0.0051 -0.0025
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24-Sep-10 23-Sep-10 22-Sep-10 21-Sep-10 20-Sep-10 17-Sep-10 16-Sep-10 15-Sep-10 14-Sep-10 13-Sep-10 9-Sep-10 8-Sep-10 7-Sep-10 6-Sep-10 3-Sep-10 2-Sep-10 1-Sep-10 31-Aug-10 30-Aug-10 27-Aug-10 26-Aug-10 25-Aug-10 24-Aug-10 23-Aug-10 20-Aug-10 19-Aug-10 18-Aug-10 17-Aug-10 16-Aug-10 13-Aug-10 12-Aug-10 11-Aug-10 10-Aug-10 9-Aug-10 6-Aug-10 5-Aug-10 4-Aug-10 3-Aug-10 2-Aug-10 30-Jul-10

20,045.18 19,861.01 19,941.72 20,001.55 19,906.10 19,594.75 19,417.49 19,502.11 19,346.96 19,208.33 18,799.66 18,666.71 18,645.06 18,560.05 18,221.43 18,238.31 18,205.87 17,971.12 18,032.11 17,998.41 18,226.35 18,179.64 18,311.59 18,409.35 18,401.82 18,454.94 18,257.12 18,048.85 18,050.78 18,167.03 18,073.90 18,070.19 18,219.99 18,287.50 18,143.99 18,172.83 18,217.44 18,114.83 18,081.21 17,868.29

0.0092 -0.0041 -0.0030 0.0048 0.0158 0.0091 -0.0043 0.0080 0.0072 0.0215 0.0071 0.0012 0.0046 0.0184 -0.0009 0.0018 0.0130 -0.0034 0.0019 -0.0126 0.0026 -0.0072 -0.0053 0.0004 -0.0029 0.0108 0.0115 -0.0001 -0.0064 0.0051 0.0002 -0.0083 -0.0037 0.0079 -0.0016 -0.0025 0.0056 0.0019 0.0118 -0.0069

18,762.50 18,775.00 18,712.00 18,704.50 18,693.00 18,778.00 18,770.00 18,842.50 18,614.00 18,440.00 18,663.00 18,787.00 18,667.50 18,587.00 18,689.00 18,658.00 18,743.50 18,573.50 18,544.50 18,540.50 18,551.50 18,549.50 18,300.00 18,328.50 18,357.00 18,296.00 18,254.50 18,306.50 18,316.00 18,173.00 18,009.50 17,883.50 17,780.00 17,831.00 17,660.00 17,717.50 17,707.00 17,547.50 17,513.00 17,530.00

-0.0007 0.0034 0.0004 0.0006 -0.0045 0.0004 -0.0039 0.0122 0.0094 -0.0120 -0.0066 0.0064 0.0043 -0.0055 0.0017 -0.0046 0.0091 0.0016 0.0002 -0.0006 0.0001 0.0135 -0.0016 -0.0016 0.0033 0.0023 -0.0028 -0.0005 0.0078 0.0090 0.0070 0.0058 -0.0029 0.0096 -0.0033 0.0006 0.0090 0.0020 -0.0010 0.0023
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29-Jul-10 28-Jul-10 27-Jul-10 26-Jul-10 23-Jul-10 22-Jul-10 21-Jul-10 20-Jul-10 19-Jul-10 16-Jul-10 15-Jul-10 14-Jul-10 13-Jul-10 12-Jul-10 9-Jul-10 8-Jul-10 7-Jul-10 6-Jul-10 5-Jul-10 2-Jul-10 1-Jul-10

17,992.00 17,957.37 18,077.61 18,020.05 18,130.98 18,113.15 17,977.23 17,878.14 17,928.42 17,955.82 17,909.46 17,938.16 17,985.90 17,937.20 17,833.54 17,651.73 17,471.03 17,614.48 17,441.44 17,460.95 17,509.33

0.0019 -0.0067 0.0032 -0.0061 0.0010 0.0075 0.0055 -0.0028 -0.0015 0.0026 -0.0016 -0.0027 0.0027 0.0058 0.0102 0.0103 -0.0082 0.0099 -0.0011 -0.0028

17,489.00 17,426.50 17,740.00 17,917.50 18,040.50 17,949.00 18,021.00 17,893.50 17,967.00 18,075.50 18,147.00 18,140.50 18,096.50 18,073.00 17,942.50 18,092.50 17,975.50 18,182.50 18,165.50 18,107.50 18,555.50

0.0036 -0.0178 -0.0100 -0.0068 0.0051 -0.0040 0.0071 -0.0041 -0.0060 -0.0039 0.0004 0.0024 0.0013 0.0072 -0.0083 0.0065 -0.0114 0.0009 0.0032 -0.0244

Results:-

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Mean Return Standard Deviation Variance

0.000292 0.010662 0.000114

0.000554 0.006963 0.000048

Co-Variance Correlation

-22205 -0.02011

3. CONCLUSION
In this Project I have compared Stock market prices & Gold prices. For this 100 investor were surveyed. It was found that the most of investor preferred stock market for getting high return of
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their investment rather than investing in Gold. But these investor keeps the gold in their portfolio also. With the increasing education and awareness towards the share market investor are capable of analyzing which investment would give better return and they invest accordingly. In this research I could find investor choose share market as an investment to seek higher return. In case of Gold the investment is safe with higher return and low risk.

Most of Investors thinks about divest his/her investment at the time of fluctuation in the price of stock market. Most of the investor liquidates his/her investment at the time of need of money.
Adequate return on investment and fluctuation in market is the base of investors decision

making towards the investment.

Other investment options are affected due to the investments towards stock market and

gold.
The co-relation between gold and the sensex comes 0.2. i.e. there is a negative co-

relation between sensex and gold prices. It means that if gold moves in either direction the sensex that is negatively correlated will move by 2% in the opposite direction.

4. LIMITATIONS
1. Study has done Indore city only.
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2 .Only two area of investment is considered. 3. Respondent feels hesitate to give their financial information. 4. We took the gold prices and the stock prices of 1 year. So whatever may be the impact, it will show only 1-year co-relation between the BSE and the gold prices. 5. We took the gold prices according to the Indian context only i.e. we can see the impact on national level only. 6. We include the impact of gold on Indian market i.e. on Sensex (BSE) only, not on the international market. 7.The direction of the gold movement is governed by various external factors, such as central bank sales, tendency to shift in and out of gold depending upon currency, speculative activity etc. so we will not include all these factors. 8. Trading in Commodity market is open 6 days a week but trading in stock market occurs in 5 days a week. So we took prices of only that days on which trading in both market.

5. REFERENCES BOOKS:Page | 51

 Bhattacharya, B.B. and Chakravarty, S. (1994). Share price behavior in India: An

Econometric Analysis, paper presented in Econometric Conference, Pune, 1994. Bhattacharya, B.B. and Chakravarty, S. (2002). Stock Volatility in India. Institute of Economic Growth Discussion paper series.55/2002

Bhattacharya B and Mukherjee J(2002) Causal relationship between stock market and exchange rate, foreign exchange reserves and value of trade balance :A case study for India .www.igidr.ac.in Bhattacharya B and Mukherjee (2001).The nature of the causal relationship between stock market and macroeconomic aggregates in India: An empirical analysis .

MAGZINES:Business World, Business Today, Money Today NEWS PAPERS:Economic times, Business Bhaskar, DNA Money WEBSITES:-

www.ncdex.com www.bseindia.com www.yahoofinance.com www.moneycontrol.com www.biiwii.blogspot.com www.blanchardonline.com

www.googlefinance.com

www.kitco.com

KEYWORDS:Derivative:-A derivative is a financial instrument whose value depends on underlying variables.

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Derivatives market:-It is the financial market for derivatives and financial instruments like futures contracts or options, which are derived from other forms of assets. Spot Price: - The current price at which a particular commodity can be bought or sold at a specified time and place. Stock Split: - It-is a decision by the company's board of director to increase the number of shares those are outstanding by issuing more shares to current shareholders. Reverse split: - It is a process by a company of issuing to each shareholder in that company a smaller number of new shares in proportion to that shareholder's original shares that are subsequently canceled. Over-the-Counter (OTC):- To trade financial instruments such as stocks, bonds, commodities directly between two parties. Financial Instrument:-It refers those documents which represent financial claim on assets. Financial Securities: - Saving and investments are linked through a wide variety of financial instrument known as securities. Dividend: - A dividend is a portion of corporate earning paid out to shareholders. Future Market: - An auction market in which participants buy and sell commodity and future contracts for delivery on a specified future date. Future Price: - The price at which the two participants in a futures contract agree to transact at on the settlement date.

Sample Questions

(1)Name Please fill your full name

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(2)Age (3)Marital Status

Single Married

(4)Education:

S.Sc. H.Sc. Graduation Post Graduation Doctorate

(5)Occupation

Government Employee Private Employee Self-Employed Professional

(6)Annual Income

Below 250000 250000-400000 400000-550000 800000 and above

(7)What percentage of your monthly household income could be available for savings?

10%-15% 16%-20% 21%-25% 26%-30% 30% and above

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(8)How much of your monthly income is available for Investment?

Below 15000 15000-30000 30000-45000 45000 and above

(9)Your preferred area of investment is?

Stock Market Purchase gold Others

(10)In which sector do you prefer to invest your money?

Government sector Private sector

(11)What is your purpose behind investments?

Safety of Capital Retirement Beating Inflation Liquidity Tax Minimization Growth of CapitalReturns Others

(12)How much importance do you give to your investment objective?

Dividend gain Tax saving Capital gain Wealth Maximization High risk and High return Growth of CapitalReturns
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(13)How did you know about various Stock market plan & Gold price?

Financial Advisor Market Analyzer Broker Self observation Newspaper Television

(14)Whom do you consult to, before investing in Stock or Gold ?

Financial Advisor Market Analyzer Broker Commodity consultant Others

(15)Since when are you investing in financial instruments?

Less than 3 months 3 months 6 months 6 months 8 months 8 months 12 months More than 12 months

(16)What is the structure of your Portfolio? Please rank as per your portfolio percentage

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1 Stock exchange and their instrument Gold Government Bond Fix Deposit Mutual Fund Insurance (17)When you think to divest your Investment?

Inflation Fluctuation in price Volatility of economy Government Intervention

(18)Why you divest your investment?

Inadequate return on investment Need of Cash Emerging Growth in other sector

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