Page 39 - DCOM504_SECURITY_ANALYSIS_AND_PORTFOLIO_MANAGEMENT

Security Analysis and Portfolio Management

Notes low. If there are no transactions in a company's share on any day, the previous day's closing
price is presented in brackets.
The EPS is the average net profit after tax per equity share and the CPS the average cash profit
(after adding the depreciation) per share. The cash P/E is the ratio of the day's closing price to the
cash earnings per share distinct form the P/E ratio which relates price to the net profit per share.
PE values are not printed when earnings are either nil or negative.
The RNW is the net profit as a percentage of the net worth and measures the return earned on the
shareholders i.e., equity capital plus reserves. The GPM is the gross profit margin (before
depreciation and tax) as a percentage of gross sales and measures the company's profit margin
which is available to absorb depreciation charges arising from capital expenditures, tax payments,
dividend distribution and profit ploughback. All the figures taken from the latest available
results (audited/unaudited) of the company. The 52-week high and low prices of each share are
worked out a new every day on the basis of the higher and lowest points scaled during the
immediately preceding 52 weeks. The high and lows are adjusted for bonus of rights issue of
equity shares.
Besides these quotations, share price indices are also published in different dailies. The Bombay
Stock Exchange's of share Sensex and 100 - share 'National' indices are quite popular. Besides
these, there are other indices also which include The Economic Times Index of Ordinary Share
Price, Business Standard Index of Ordinary Shares price and few others. Reserve Bank of India
also publishes Share Price Index. PTI stockscan provides minute-to-minute share price information
about Bombay, Delhi, Ahmedabad, Calcutta and Madras stock exchanges.

1.3.7 Principal Weaknesses of Indian Stock Market

While in terms of number of stock exchanges, listed companies, daily turnover, market
capitalization and investor population, the Indian stock market has witnessed impressive growth
over the last four decades. But it still suffers other forms of weaknesses, some of which are
serious. We may point our principle weaknesses of the Indian stock market as follows:

1. Rampant speculation: Indian stock exchanges have been witnessing spells of unprecedented
booms and crashes. While the cost has been experiencing generally 4-5% rate of growth,
the share prices have shown high volatility. This only shows that the speculative activities
have been rampant. This does not reflect a very healthy state of affairs. The twin
characteristics of excessive exuberance and high volatility have made the Indian stock
market crises prone. The distinction that Keynes made in 1929 in the Wall Street Journal
between 'speculators' operating on the basis of forecasting the psychology market, and
'investor's trying to forecast the prospective yield of the assets over the whole life has
almost vary in India's market conditions.
2. Insider Trading: Like speculation, insider trading is rampant in Indian stock exchanges.
Insider trading means operation information which is price sensitive and not available to
the public. Insider trading is thus trading from a position of privilege in respect of
price-sensitive information. Insider trading is decried because it violates level playing, a
state where equal opportunity to information is available to all the participants in the
market.

3. Oligopolistic: The Indian stock market cannot be called truly competitive. It is highly
dominated by large financial and institutional big brokers, and operators and is, thus,
oligopolistic in structure.
4. Limited Forward Trading: As pointed out above, there can be three types of transactions
undertaken at the stock exchanges namely spot delivery, hand delivery and forward

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