Free Sample: Market efficiency paper example for writing essay

Market efficiency - Essay Example

Before the budget the market was in the consolidation stage as before that market had seen a drastic fall in the market due to reliance IPO which can also be said as Black Monday where market saw a fall of 834 points about 4. 8% in Bombay Stock Exchange (BSE) and also some other factors also affecting the market to slow down. These can be seen in Appendix- G where I have shown NIFTY index showing the data from 1’st of February to 28’Th February 2008 where we can see the market made in losses in the 1’st week by more than 150 points.

Budget Giant state-run Indian Railways, once on track for bankruptcy around 2 years back, posted a record $6. 3 billion surplus this year up from a $4. 4 billion surplus the previous year on Tuesday, announced new lines and cut fares in a populist budget with elections looming. RAILWAY minister Lalu Prasad Yadav gave the bulls a reason to cheer, slashing freight rates and announcing a slew of infrastructure projects in the Rail Budget presented on Tuesday 26’th February. (Source economics times, dated on 27, Feb, 2008) .

While the railway budget had given a big boost to the infrastructure development; stock markets has appreciated the move. The budged proposed an investment of Rs 250,000 crore in IT and network up-gradation over five years. “This is one of the most investment-oriented budgets that the Railway Ministry has presented in the history. The benefits of the government’s plans to upgrade IT services will go to India-focused IT companies which was stated by the minister. CMC and Wipro are the two largest system integration players in India, and hence are likely to benefit” This was the statement which came out from the leading analysts.

Also the minister announced plans for SMARTCARD ticketing system, touch screens, colour TVs across all major stations, 6,000 automatic ticket sale machines in two years, call centres for reservations, ticket confirmation via mobiles, among others this were the main features of the budget. The minster has shown faith in Indian IT industry. The Impact on the stock exchange didn’t took much of time the effect was immediately seen on the intraday trading index of capital goods went up 2. 05% on Tuesday with 30-share sensitive index (sensex) moving up 0. 88% (156 points).

Also in the commodity market, stainless steel manufacturer Jindal Stainless’ share price went up by 7. 2% to Rs 160 crore. Railway minister Lalu Prasad Yadav had also proposed construction of stainless steel coaches, which is expected to push up the demand for this product in the country. This gave good news for Jindal Stainless as it is one of the largest producers of this product; the move is likely to increase the profitability of the company which is guessed in the near future.

The 30-share Sensex surged 155.62 points, or 0. 8%, to close at 17,806. 19 on sustained buying in transport-sensitive sectors like metal, capital goods, real estate, oil and cement. The 50-share Nifty ended 145. 45 points, or 1. 33%, up at 5,270. 05. (Source- http://epaper. timesofindia. com/Repository/ETM/2008/02/27/ETM_2008_2_27. pdf) The market breadth was positive on the BSE, with 1,652 shares advancing and 1,074 declining, while 59 remained unchanged. Compared with Monday, the combined traded turnover was about Rs 5,000 crore higher on Tuesday at Rs 68,000 crore.

The key sectors that would benefit after the budget was logistics, EPC, IT, electronic equipment as per the some leading brokers in the country. Conclusion of the event I feel that the market was highly efficient it reacted relatively well with the railway budget 2008 results and also market does looks at some other factor apart from the budget which can understood with the help of the graph which is in Appendix F where we look at Wipro and CMC companies which are leading Indian IT companies.

Before the budget on 13’th Feb these both companies were trading at Rs 409. 09 and Rs 438.95 with dollar getting stronger on INR and also with the news of as the railway minister said budget’s proposed investment of Rs 100,000 crore in infrastructure will create great business opportunities for Indian companies besides this, also its plans to invest Rs 75,000 crore towards improving infrastructure and Rs 25,000 crore for enhancing technology and building a dedicated freight corridor has given boost to the IT stock. We can also see after the budget there was relatively positive reaction and this can be seen most of cements, steels, power and IT stock rising and this helped the index of capital goods went up 2.05% on Tuesday with 30-share sensitive index (sensex) moved up to 0. 88% (156 points).

Therefore market reacted on it and shouted up the price of share for both companies the IT companies which graph is in appendix F. Also the budget has given hopes for the steel, iron, electronic equipment companies which saw increase in their share prices but failed to sustain the price for long time as the investment was suppose to be made in next 5-year’s and also latter the month there was Union-Budget 2008 to held which market had realised.