Intercorrelation Between Nse Cnx Nifty50 and Nse Sme Emerge Index

International Journal of Scientific Research and Review ISSN NO: 2279-543X

INTERCORRELATION BETWEEN NSE CNX NIFTY50 AND NSE SME EMERGE INDEX

Lakshmi Priya Mulaka Research Scholar, Department of Commerce and Management Studies, Andhra University. [email protected]

Abstract — “Stock market is the barometer of the economy”. So in order to understand and evaluating the stock market an index is required as a broad sense, but there is an essential to have sectorial indices to extend the study and analysis of the market for more understanding. In India National Stock Exchange is one of the national stock exchange along with the BSE, CNX NIFTY 50 is an index to track the NSE market as a whole. Among the several indices of NSE, SME Emerge index is one of the thematic indexes in order to represent the Small Medium Enterprise (SME) sector. This research article aimed to analyze the interrelationship between NIFTY 50 and NSE SME Emerge index.

Keywords — Stock Market, CNX NIFTY 50, NSE SME Emerge Index, SME sector.

I. INTRODUCTION

THE INDIAN SECURITIES CONTRACTS (R EGULATION ) ACT OF 1956, DEFINES STOCK MARKET AS , "An association, organization or body of individuals, whether incorporated or not, established for the purpose of assisting, regulating and controlling business in buying, selling and dealing in securities." Stock Market is a place where companies can raise long-term funds such as common stock, preferred stock, and bonds. It is an organized marketplace, either corporation or mutual organization, where members of the organization gather to trade company stocks or other securities.

National Stock Exchange (NSE): The National Stock Exchange (NSE) is the major stock exchange in India and ranked fourth largest amongst the leading stock exchanges in the world 2015, according to World Federation of Exchanges (WFE). Its operation started from 1994 and is ranked as the largest stock exchange in India according to the annual reports of SEBI.NSE launched e - flat form trading in 1994, derivatives trading (in the form of index futures) and internet trading in 2000, which were each the first of its kind in India. NSE has a fully- integrated business model comprising our exchange listings, trading services, clearing and settlement services, indices, market data feeds, technology solutions and financial education offerings. NSE is a pioneer in technology and ensures the reliability and performance of its systems through a culture of innovation and investment in technology.

NSE CNX NIFTY 50: The NIFTY 50 is a well-diversified fifty stock index accounting for 12 sectors of the Indian economy. It has a number of purposes such as benchmarking fund portfolios, index based futures and options and index funds. India Index Services and Products Ltd. (IISL) is the managing and owned body of NIFTY 50. IISL is India's specialized organization mainly focused upon the index as a core product. The NIFTY 50 Index represents about 62.9% of the free float market capitalization of the stocks listed on NSE as on March 31, 2017.NIFTY 50 is ideal for derivatives trading.

NSE SME EMERGE INDEX: NIFTY SME EMERGE Index designed to reflect the performance of a portfolio of eligible small and medium enterprises that listed on NSE EMERGE platform. The index has a base date of December 01, 2016 and a base value of 1000 to form part of the NIFTY SME EMERGE Index, stocks should qualify the following eligibility criteria: Stocks should be listed under NSE EMERGE platform At the time of quarterly review, stocks should have traded for a minimum of 25% of trading days subject to a minimum of 10 trading days during the previous 3 months

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Index is reconstituted on a quarterly basis Constituents are weighted based on free float market capitalization

Significance of SME Sector in India’s Economy and need for the SME Index: Small and Medium Enterprises (SMEs), including micro enterprises, play a vital role in Indian economy by producing different range of products & services and contributing to value addition across sectors. SMEs including registered and unregistered, which contributed nearly 30% to the India’s GDP from Financial Year 12 to Financial Year 15, are the pillar to the overall economic growth and crucial contributor to employment producer in the country. Initiatives like ‘Make in India’, ‘Startup India’, MUDRA Yojana and ‘Skill India’ envision SMEs as the catalyst to socio-economic transformation in India.

A crucial role played by the Small and Medium enterprises (SMEs) towards India’s economic development. It’s contribution is about 8.7% to the GDP and is over 45% in total production in India. SME sector is generating second largest employment after agriculture; moreover, it is contributing over 40% of total exports. It provides employment to about 6.9 crore people with the help of 2.6 crore enterprises and 13 lakhs job creations every year. In spite of it’s great contribution, Indian SMEs are limited to the access of the funds for long term and short term. So there was a necessity to government to establish a system which can aid the SMEs to grow without any such problem. India’s national capital markets, BSE and NSE both have taken the initiative to provide such a platform to the SMEs to facilitate the entrepreneurs to raise equity capital for their development and provided a chance for the wealth creation. II. RESEARCH OBJECTIVES

To study the NSE SME exchange. To study advantages and opportunities prevailing to get the entry into SME exchange. To study the relationship between NIFTY 50 and SME EMERGE III. RESEARCH DESIGN AND METHODOLOGY

Research Design To study the relationship between NIFTY and SME EMERGE, the Causal Research Design is used. Data Collection Method However, the study based on the secondary sources the data collected from official websites of NSE and NSE EMERGE, journals, magazines, books etc. Sample Two samples are selected for this study i.e. NSE NIFTY 50 index and NSE SME EMEREGE index. Sample Period Aggregated Monthly data of NSE NIFTY 50 and NSE SME EMERGE have been collected during December - 2016 to October -2017. Statistical Tools & Packages Statistical tools used in this study are Karl Pearson coefficient of correlation, One way ANOVA, SPSS package and Microsoft Excel. Limitations of the Study The study based on secondary data collection method. Hence, the limitations of this method applied in this study .

IV. DATA ANALYSIS AND INTERPRETATION

TABLE NO 1: SECTORAL REPRESENTATION OF NSE SME EMEREGE INDEX SECTOR WEIGHT (%) SERVICES 23.63 IT 12.77 CONSUMER GOODS 10.18 PAPER 9.5 INDUSTRIAL MANUFACTURING 9.29 FERTILISERS & PESTICIDES 6.46 PHARMA 6.34

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TEXTILES 5.79 CHEMICALS 4.72 FINANCIAL SERVICES 4.27 CONSTRUCTION 3.97 HEALTHCARE SERVICES 1.45 METALS 1.07 AUTOMOBLE 0.54

Interpretation: From the above information, it is evident that sectorial weightage is higher for service sector then IT sector, least priority is given to Automobiles and then Metals. Furthermore, it is clearly known that the INDEX constitutes the majority sectors of the economy

The relevant graph is shown below GRAPH 1: SECTORAL REPRESENTATION OF NSE SME EMEREGE INDEX

TABLE NO 2: SECTORAL REPRESENTATION OF NSE NIFTY50 INDEX SECTOR WEIGHT (%) FINANCIAL SERVICES 35.09 ENERGY 15.48 IT 10.8 AUTOMOBILE 10.27 CONSUMER GOODS 9.25 METALS 4.65 PHARMA 4.23 CONSTRUCTION 3.79 TELECOM 2.43 CEMENT & CEMENT PRODUCTS 1.67 SERVICES 0.85 MEDIA & ENTERTAINMENT 0.75 FERTILISERS & PESTICIDES 0.73 Interpretation: The above table and graph depicts that INDEX covers all the sectors of the Economy, more weightage given to Financial Services, Energy, and less weightage is given to Media and Entertainment, Fertilizers and pesticides .

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The relevant graph is shown below GRAPH NO 2: SECTORAL REPRESENTATION OF NSE NIFTY50 INDEX

. TABLE NO:3 MONTHLY CLOSING DATA OF NSE NIFTY 50 AND SME EMERGE INDICES MONTH NSE NIFTY 50 SME EMERGE 17-OCT 10335.3 1361.04 17-SEP 9788.6 1254.83 17-AUG 9917.9 1206.49 17-JUL 10077.1 1198.75 17-JUN 9520.9 1165.83 17-MAY 9621.25 1088.15 17-APR 9304.05 1114.98 17-MAR 9173.75 1068.46 17-FEB 8879.6 1132.5 17-JAN 8561.3 1153.17 16-DEC 8185.8 1074.64 Source: www.niftyindices.com GRAPHICAL REPRESENTATION OF NIFTY 50 AND SME EMERGE INDEX

CORRELATION ANALYSIS VARIABLES NSE NIFTY 50 SME EMERGE

NSE NIFTY 50 1 0.711128

SME EMERGE 0.711128 1 Computed from MS Excel

Interpretation: There is a positive correlation between NSE NIFTY 50 and NSE SME EMERGE. It indicates both variables are moving in the same direction, i.e If NSE NIFTY 50 increases then NSE SME EMERGE also increases otherwise if NSE NIFTY 50 decreases then NSE SME EMERGE also decreases. So the study concludes that there is a relationship between these two indices. ONE -WAY ANOVA ANALYSIS : H0 : The means of the samples are equal ( µ 1= µ 2 ) H1 : The means of the samples are not equal ( µ 1≠ µ 2 )

Volume 7, Issue 3, 2018 119 http://dynamicpublisher.org/ International Journal of Scientific Research and Review ISSN NO: 2279-543X

SOURCE DF SS MS TEST STAT CRITICAL VALUE P-VALUE TREATMENT 10 2609555.92 260955.6 ERROR 11 374460232 34041839 0.008 2.853621 1.000

TOTAL 21 377069788

Computed from stat disk package GRAPHICAL REPRESENTATION OF THE ONE -WAY ANOVA TEST

Interpretation: The calculated F value falls in the acceptance region so the null hypothesis is accepted and concluded that the mean variances are equal between the samples. It means there is no mean difference between the NSE NIFTY 50 and NSE SME EMERGE Index. V. FINDINGS

The two series have been first tested for correlation and the outcome was 0.711128 , which clearly depicts that there is strong positive correlations which signify that both the series moves together in the same direction. It shows that NIFTY 50 moves up SME EMERGE also moves up. It shows that NIFTY 50 moves down SME EMERGE also moves down. The two series has been applied for ANOVA in which the calculated f value is less than the table value and p value thus the Null hypothesis is accepted, and therefore Alternate hypothesis is rejected. So it can be concluded that NIFTY 50 and SME EMERGE has an association There is no mean difference between NIFTY 50 and SME EMERGE From the study one can say that SME EMERGE yield is based on the NIFTY 50

VI. CONCLUSION

The study analyzed that NIFTY 50 movement and SME EMERGE index are quite closely correlated in India so it means that there is a significance influence on the movement of NIFTY 50. According to findings and results, I concluded that NIFTY 50 did have high significant impact on the SME EMERGE Index. Therefore, the null hypothesis is accepted. NIFTY 50 have positive impact on SME EMERGE

REFERENCES

[1] Lee, Joseph, Yuhong, Yan and Poon Joanna, “A comparison Between Shenzhen SME Companies and Hong Kong GEM Companies”, Research Department of the Supervision of Markets Division, March, 2005, p.1-6. [2] Sharma, Anju, “Small and Medium Entrepreneurs in a liberalized Era: An Empirical Investigation”. [3] Virender Singh Thakur, “BSE SME Exchange and NSE EMERGE Exchange Platforms in India and a Comparison between them” IJLTEMAS, Volume V, Issue III, March 2016, p.82-90 [4] www.nseindia.com/emerge [5] www.bseindia.com [6] www.moneycontrol.com [7] www.niftyindices.com