SHRI CHINAI COLLEGE COLLEGE OF COMMERCE COMMERCE AND ECONOMICS ANDHERI (EAST)
MUMBAI – 400069
BACHELOR OF MANAGEMENT STUDIES PROJECT REPORT ON “-------------------------------------------------“
SUBMITED BY: BY: PRIYANA PRIYANA RAMESH ANERE T!Y!B!M!S !Y!B!M!S!! (SEMESTER (SE MESTER ")
PROJECT GUIDE: P#$%! -------------------------------
UNI"ERSITY OF MUMBAI ACADEMIC YEAR: &0'6-&0'
DECLARATION I, PRIYANA RAMESH ANERE student of SHRI CHINAI COLLEGE OF COMMERCE AND ECONOMICS , of T.Y.B.M.S. (Semester V) hereby declare
that I have completed this proect on “ durin! the academic year "#$%& "#$'. The information submitted is true and ori!inal to the best of my noled!e. *+T: ---------------------SI-+T/0 12 ST/*T
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CERTIFICATE ,
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.444444444444444444444444444,5ere
by
certify
that
Miss6Mr44444444444444444444444444444,student of TYBMS( SM V) ,+cademic year "#$%4 "#$',has successfully completed the proect on4444444444444444444444444444444444under my -uidance.
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COLLEGE SEAL
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ACNO*LEDGEMENT
It has alays been my sincere desire as a mana!ement student to !et an opportunity to e;press my vies, sills, attitude and talent in hich I am proficient. + proect is one such avenue throu!h hich a student ho aspires to be a future mana!er does somethin! creative. This proect has !iven me the chance to !et in touch ith the practical aspects of mana!ement. I am e;tremely !rateful to the /niversity of Mumbai for havin! prescribed this proect or to me as a part of the academic re
I*: TOPICS
CHAP
PAG E
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NO.
1.
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INTRODUCTION
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HISTORY
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FEATURES
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FUNCTION
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CLASSIFICATION
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MERITS AND DEMERITS
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2.
2. OBJECTIVES 1
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3. RESEARCH METHODOLOGY 1
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4. STRATEGY 1
5.
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COMPARISION
6.
SUGGESION AND CONCLUSION
7.
BIBLIOGRAPHY
8.
ANNEURE
E+ECUTI"E SUMMARY
ONE PAGE
THREE PARA
CHAPTER 1
INTRODUCTION OF MAR!ET CRASH IT01*/8TI1 C4 + Stoc maret crash is a sudden dramatic decline of stoc prices across a si!nificant cross & section of a stoc maret, resultin! in a si!nificant loss of paper ealth. 8rashes are driven by panic as much as by underlyin! economic factors. They often follo speculative stoc maret bubbles. Stoc maret crashes are social phenomena here e;ternal economic events combine ith crod behaviour and psycholo!y in a positive feedbac loop here sellin! by some maret participants drives more maret participants to sell. + stoc maret crash is a rapid and often unanticipated drop in stoc prices. -enerally speain! crashes usually occur under the folloin! conditions C + prolon!ed period of risin! stoc prices and e;cessive economic optimism, a maret here 36 ratio e;ceed lon!4term avera!es, and e;tensive use of mar!in debt and levera!e by maret participants. There is no numerically specific definition of a stoc maret crash but the term commonly applies to steep double4di!it percenta!e losses in a stoc maret inde; over a period of several days. 8rashes are often distin!uished from bear marets by panic sellin! and abrupt, dramatic price declines. Bear marets are periods of declinin! stoc maret prices that are measured in months or years. Dhile crashes are often associated ith bear marets, they do not necessarily !o hand in hand. The crash of $A', for e;ample, did not lead to a bear maret. 9ieise, the 7apanese bear maret of the $#s occurred over several years ithout any notable crashes.
'!& *,. / 1S.$23 M#3. C#,1 + stoc maret crash is a rapid and often unanticipated drop in stoc prices. + stoc maret crash can be the result of maor catastrophic events, economic crisis or the collapse of a lon!4term speculative bubble. 5oever, public panic is a maor contributor. 5ordes of people removin! their money from the bans or scramblin! to sell their stocs and other assets all at the same time causes economic turmoil and e;acerbates any e;istin! economic instability.
+lthou!h there is no specific threshold for stoc maret crashes, they are usually identified as abrupt double4di!it percenta!e drops in a stoc inde; over the course of a fe days. 1.3 Crash + sudden and si!nificant decline in the value of a maret. + crash is most often associated ith an inflated stoc maret. 8auses for a crash may include an economic bubble in hich securities, or other investments, are tradin! at prices far above their intrinsic value, or a hi!hly4levera!ed maret in hich debt is used to finance further investment. 8rashes are distin!uishable from a bear maret by their rapid decline in a number of days, rather than a decline over a lon!er period of time. + crash can lead to a depression in the overall economy and subse
CHAPTER 5 HISTORY OF MARET CRASH 5!' INTRODUCTION T, *$#71 F/#. S.$23 M#3. C#, H887 N# 500 Y# A;$
Buildin! on a lon! tradition of catastrophic financial maret crashes, the economic meltdon caused by the burstin! of the housin! bubble in "##A is only the latest in a lon! line of epic stoc maret fails. In fact, nearly >## years a!o unscrupulous players, political cronies and laisseE4faire !overnment combined to create a Ftoo bi! to failF company, and then stood around helpless hen it did. This is the story of the South Sea 8ompany Bubble. F#<7 / ., '=., C.<#
In order for insiders to reap the !reatest profit, the founders of the South Sea 8ompany be!an a to4pron!ed, ethically challen!ed campai!n. 3rior to the announcement of the companyGs plan to buy !overnment debt, insiders discredited BritainGs ability to finance itself, drivin! don the value of that debt. The insiders then !obbled it up at the !reatly reduced rate of H@@6H$##.
e;t, to encoura!e debt holders to e;chan!e it for shares, the insiders loudly proclaimed the !reat value of the companyGs tradin! operations, includin! its (valueless) South +merican monopoly. To be fair, South Seas still had a si!nificant slave tradin! operation, althou!h this as not as lucrative as had been hoped. In any event, shortly after the debt4buyin! plan as announced, South Sea 8ompany stoc sold at H$"> per share (up from the H$## it as valued at pre4announcement, and the H@@ that the duped debt holders received). E# #
By $'$#, n!landGs finances ere a fri!ht. *ifferent !overnment departments arran!ed their on loans and e;pended money ith little financial oversi!ht. The 8hancellor of the ;che
5!& LIST OF STOC MARET CRASH TOO PLACE IN FOREIGN COUNTRIES! NAME
YEAR
CAUSES
I330 +* DI330
$%">
T/9I3 M+I+ B/BB9
$%>'
+ financial crisis caused by debased (fraudulent) forei!n coins minted in the 5oly 0oman mpire from $%"$4$%">, done to raise funds at the start of the Thirty YearsG Dar + bubble ($%>>&>') in the etherland durin! hich contracts for bulbs of tulips reached e;traordinarily hi!h prices, and suddenly collapsed
BraEilian Marets 8rash
$'$
8hinese stoc maret crash
"#$@
9astin! throu!h the $'#s and early4$A#s, this as the end of a boom that started in $%, compounded by the $'#s ener!y crisis coupled ith early $A#s 9atin +merican debt crisis. 8hina stoc maret crash starts in 7une and continues into 7uly and +u!ust. In 7anuary "#$%, 8hinese stoc maret e;periences a steep sell4 off hich sets off a !lobal rout.
>.> 9IST 12 ST18 M+0T 80+S5 T1139+8 I I*I+ +M Y+0 8+/SS 5+0S5+* M5T+ $" 5arshad Mehta scam as the bi!!est scam done in india in the year $". 5e as nos as the bi! bull in stocmaret etan pareh "###4"##$ etan pareh as share broer in Mumbai . he as no as tistin! the system Satyam scams "## Satyam scam as one of the maor corporate scam and accountin! scandal as the recent one
>.? history of forei!n countries $. T, D<.2, T</8 M/ (3 “T</8$>/) $% '654-'65 :T</8 M/ $# T</8$>/ as a speculative bubble in tulip bulbs that too place in the etherlands from $%>? to $%>'. Tulipomania occurred shortly after the tulip plant as introduced to urope from the 1ttoman mpire, in present4day Turey.
The tulip plantJs rarity and e;otic beauty (as compared to plants that ere common in urope at the time) helped it to find immediate favor ithin *utch hi!h society, ho cultivated and displayed tulips as a status symbol. +s tulip prices rose to ne hei!hts, speculators be!an to buy tulip bulbs to KflipL later on for hi!her prices. Very soon, almost all classes of *utch society ere involved in tulip bulb speculation, ith many tradin! all of their orldly possessions for a sin!le tulip bulb. Dhen tulip bulb prices became orth the e
". T, S$<., S B
The S$<., S B
>. J8@ B $% ., '9=0 :*urin! the late4$A#s, 7apan e;perienced its KBL in hich real estate and stoc prices soared alon! ith the countryJs overheated economy. 7apanJs KBubble conomyL era occurred at the end of its three4decade old Kconomic MiracleL that be!an after Dorld Dar II and sa the countryJs fortunes blossom as it became the orldJs automobile and electronics manufacturin! poerhouse. By the pea of 7apanJs Bubble conomy in $A, a house in Toyo cost ell over " million and the land underneath ToyoJs Imperial 3alace as rumored to be orth more than all of the land in 8alifornia. 7apanJs Bubble conomy peaed in late $A and the countryJs hi!hly4inflated stoc and property marets be!an to crash. By $", 7apanJs iei stoc inde; plun!ed to $@,### from its pea of nearly ?#,### and the countryJs real estate marets ere decimated alon! ith the rest of the economy. Since $A, 7apanJs Bubble conomy has deflated for over to decades, leadin! to this era bein! called the K9ost *ecades.L
85+3T0 ? 0+S1S +* 8+/SS 12 ST18 M+0T 80+S5 I I*I+ ?.$ 0+S1S There are many reasons for stoc maret to crash but some of the top > reasons ere the stoc maret crash mostly in india. The top > reasons hy the Indian stoc maret crash.
Indians al in front of a di!ital board displayin! share price information on the facade of the Bombay Stoc ;chan!e (BS) buildin! in Mumbai, India, Tuesday, 7an. %, "#$@. -lobal stocs san Tuesday for a second day as slumpin! oil prices and concern -reece mi!ht leave the uropean currency union fueled unease about the !lobal !roth outloo. The BS sense; fell by over ## points in one of its orst falls Tuesday, accordin! to a nes a!ency. (+3 3hoto60aanish aade) + fe days a!o the /nited ations pinned India as the fasted !roin! economy of the orld. IndiaGs economy for the third N, hile on an annualiEed basis the fi!ure as '.%N. ot that this is a !reat fi!ure !iven the e;pectations of investors but it is ay better than 0ussia, Taian and BraEil that are facin! recession. ot to mention 8hinaGs !roth fallin! to the loest level in "@ years . o here is the
1. Non-performing assets (NPAs) and bad loans If the financials of a company are weak, it is going to fail, no matter the kind of policy you follow. This is what exactly happened with India. Investors have gradually lost interest in India's growth story because of ever-increasing N!s and bad loans of public sector banks. In monetary terms, N!s and bad loans of public banks is ""."# lakh crore e$uivalent to "%& of all the bank loans in India. This amount is more than enough to cripple any financial system in the world. I.$# , ;#7< $. /.#. / I7/1 ;#$., .$# ?2< $% #/2#/; NPA 7 ?7 $ $% 8
In "#$@, 0BI chief 0a!huram 0aan offered an opportunity to bans to clean up their mess by offerin! five interest rate cuts. But the problem came hen in a bid to increase profitability the bans did not pass the benefits to the end4customers. This limited the credit !roth and hence, the hole plan bacfired. +part from the 0BI chief, the 2inance Minister also offered a fundin! of ₹"#,### crore in $> troubled public sector bans, under the Indradhanush initiative . This plan, too, bacfired. 1fferin! more fundin! !ave bans an opportunity to play ith li.
ver since e;42ederal chief Ben Bernane stepped don and 7anet Yellen too his place, she has been talin! about raisin! interest rates. 5oever, she never actually did so until *ecember "#$@. The very mention of Fraisin! interest ratesF by Yellen created panic amidst ild speculation in emer!in! economies lie India. The impact of the statement is such that it stren!thens the /S dollar hich in turn results in capital outflos from emer!in! economies leadin! the investors to turn toards the safe haven, !old. T, # >./$ $% #//; /.#. #. ? Y 2#.7 8/2 >/7. /7 82<./$ / >#;/; 2$$>/ /3 I7/!
7ust a month after raisin! interest rates, 7apan introduced an era of ne!ative interest rates. This 2ebruary, referrin! to the ne!ative interest rates, she refuted any chances of slashin! don the interest rates in the ne!ative Eone. This tri!!ered the dollar to stren!then by $N in most cases, hence, resultin! in a massive sell4off orldide. Dhile her statements are not uncalled for, I believe one has to tae into account the holistic scenario includin! speculators, investor sentiment and risiness of e
5! T, 2#<7 $/ 2#,
Technically, India is benefittin! from the crude oil crash but it is still one of the prominent reasons hy the stoc marets crashed. This isnGt ust a commodity, but somethin! that runs a countryGs manufacturin! and industrial plants. + crash in crude oil indicates a supply !lut . 9oer demand taes place hen an emer!in! economy is not producin! enou!h. This ultimately leads to a sloer !roth.
8rude oil has crashed over A#N in a matter of $A months to about "' a barrel. ;perts are predictin! the crude oil to fall further fall to "# a barrel. This ill definitely have a lastin! impact on both developed and developin! economies, and has already stalled !roth of countries lie 8hina, 0ussia and BraEil.
T, 2#<7 $/ 2#, , /7/#2. ,7 ;./ />82. $ . 8#$7<2/; 2$<.#/ /3 I7/ 8<,/; .->3/; 2$>8/ .$#7 $!
The crude oil crash has also pushed prices of commodities lie iron and steel to multi4year los. This has indirectly had a ne!ative impact on steel producin! countries lie India, pushin! steel4main! companies toards losses. + loss4main! company cannot repay dues from bans, hich results in a bad debt or an 3+. 2or e;ample, in the third
This is vicious circle hich can only be broen if crude oil stabiliEes at a particular level so that countries can strate!iEe a ay out of the crisis.
?." causes
The most common reasons of the crash are incomplete account Kplacement shareL Boo buildin! methodL rumors and so on. +ccordin! to M. Shamsul 5a
Some of the causes are as follows:1. role of Market regulators and Their employees :- in stock market there are some regulators in the market. The employees of the market regulators do some frauds and because of thar stock market crash
".rapid investment of bank in The capital Market :- now-a-days in capital market have huge capital investment done by the banks. Therefore it causes the market crash.
>.Stock price Manipulation :- investigation report reveals that during the price bidding stage investors manipulated the share price for placement with too high price. High price was maintained only for the lock in period and then investors discharged their shares. s a result they pulled out a lot of profit within a short
period and after that the share price did not increase. in this process corrupted issuer and issue manager manipulated the price.
?. valuation of assets :- as result of weak asset revaluation method companies have over valued their assets. !n this process corrupt auditors generated artificial audit report. So " calculation of net asset value #$%& on overvalued asset price which is a faulty accounting practice. There is rule to maintain provision against 'deferred ta() during asset revaluation to pay ta( in future" but companies are not following it.
!
Market Disruption
+ situation here marets cease to function in a re!ular manner, typically characteriEed by rapid and lar!e maret declines. Maret disruptions can result from both physical threats to the stoc e;chan!e or unusual tradin! (as in a crash). In either case, the disruption creates idespread panic and results in disorderly maret conditions.
6!
Pani !elling "Dide4scale sellin! of an investment, causin! a sharp decline in price. In most instances of panic sellin!, investors ust ant to !et out of the investment, ith little re!ard for the price at hich they sell.
The main problem ith panic sellin! is that investors are sellin! in reaction to pure emotion and fear, rather than evaluatin! fundamentals. +lmost every maret crash is a result of panic sellin!. Most maor stoc e;chan!es use tradin! curbs and halts to limit panic sellin!, to allo people to di!est any information on hy the sellin! is occurrin!, and to restore some de!ree of normalcy to the maret.
'. 1ther causes C4
direct entry disparity of demand and supply of shares blindness of investors on financial report unfair audit report buying shares based on rumor and without study Ma*ority of general investors don+t have knowledge about capital market over e(pectation of general investor li,uidity crisis
