Final Research Project On

Stock Market Efficiency in India: Evidence from NSE

Deepika Aggarwal
MBA 4th SEM 11061203911

FLOW OF THE PRESENTATION

Introduction Literature Review Objective and Hypothesis of the Study Research Methodology Data Analysis Findings

Conclusion
Biblography

INTRODUCTION
Efficient Markets Hypothesis:
Markets are considered to be efficient if there is a free flow of information and the market absorbs the information quickly. Market efficiency signifies: how quickly and accurately does relevant known information in immediately discounted by all the investors and reflected in the security prices in the market. No single investor has an information edge over the others as everyone knows all possible to know information

simultaneously. Moreover every investor interprets the information

similarly and behaves rationally.

Random Walk Theory

As per this theory, changes in stock prices are independent of each other. The prices of today are independent of past trends. The price of each day is different it may be higher or lower than

the previous price or may be unchanged. The present price is

randomly determined and is influenced only by the information. This theory has been empirically tested and the analysts have also found an explanation for the efficiency of the markets.

The random walk theory is based on efficient market hypothesis. EMH says that successive absolute short run prices changes are independent. The hypothesis is based on the assumptions that all the securities markets are efficient. To have efficient markets, it is essential that both internal and external efficiency must be there:Internal efficiency: External efficiency:

OBJECTIVES OF THE STUDY

Primary Objectives:
To validate the postulates of Weak Form of Efficiency of Indian Stock Market
with reference to stock returns movement with special reference to NSE S&P CNX Nifty with the help of tools like SPSS 17.0 and EViews.

Secondary Objectives :
To study and analyze different forms of efficiency in market. To study Random Walk Theory

HYPOTHESIS:
The study is based on the following hypothesis:

H0: The S&P CNX Nifty Index stock returns do

not follow a random pattern.

H1: The S&P CNX Nifty Index is not weak form

efficient.

RESEARCH METHODOLOGY
The research is descriptive in nature and attempts to study the relevance of the Random Walk Theory with respect to S&P CNX Nifty.

The Sample:
A Sample of 25 scripts belonging to the S&P CNX Nifty Index have been selected out of a total of 50 scripts on which the Index is based on the basis of their highest market capitalization from their respective sectors.Scripts of different sectors have been represented in the sample.

 The scripts monthly returns have been taken for the period of

seven year from 1st April, 2006 to 31st March, 2013. Secondary
data of monthly return of 25 scripts belongs to S&P CNX Nifty Index been taken from the NSE website

Tools for Data Analysis: Run Test with the help of SPSS 17.0 Software PhillipsPerron Test with the help of EViews

FINDINGS
The findings show that although the market is efficient it is a weak form stage thereby showing that information dissemination is still

not immediate and insiders are still able to make profit from their
information . The result of this research is in tandem with the Sharma and

Kennedy (1977) who compared the behavior of stock indices of

Bombay, London and New York stock exchanges during 1963-73 using run test in the Indian context and the analysis confirmed the weak form efficiency of all the three stock exchanges.

CONCLUSION
The study has revealed that the S&P CNX Nifty is weak form efficient thereby showing those investors will not benefit form technical analysis

based on past data for predicting future prices. However, insider

information is not finding itself reflected in the prices thereby implying that investors having access to this information may be able to earn

abnormal profits..

THANK YOU