Institute of Chartered Financial Analysts of India (ICFAI) University 2006 Certification Finance Security Analysis – I - Question Paper

9. This transaction will remain in the order book till the price is matched

10. This order will be executed against the price of Rs.187.80 for all 5000 shares with a stop loss order of 187.55

11. This transaction will be executed as follows:

· 342 shares against the price of Rs.187.70

· 250 shares against the price of Rs.187.60

· 408 shares against the price of Rs.187.55

12. This transaction takes place for stop loss order as provided in the transaction no. 10. The respective 5000 shares will be sold against the price of Rs.187.55.

c. true buy price ==188.03

Therefore impact cost =

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5. a. Stock prices tend to move more or less in tandem with the overall market trend, represented by a market index. When the price chart of an industry, or an individual stock diverts from the course chartered by an index, the concept of relative strength can be used to study such divergence.

Year
Nifty
CNX IT
Satyam
RS Index with Nifty
RS Index with industry

2001
1254.30
2878.36
314.70
0.2509
0.1093

2002
1055.30
1807.29
227.20
0.2153
0.1257

2003
1100.15
1927.47
279.65
0.2542
0.1451

2004
1912.25
2391.19
375.00
0.1961
0.1568

2005
2115.00
2969.40
412.50
0.1950
0.1389

2006
2810.15
3857.35
721.45
0.2567
0.1870


b. Relative strength arises out of inherent merit of an industry or stock to recover from a bear market to peak out earlier than most of the stocks trading in the market.

A rising RS index shows that the stock is doing better and vice versa. RS index also follows patterns reversal of which signifies modifications in the relative strength of the stock. RS indexes are normally used in the stock selection.

The RS index of the stock with the nifty and the industry indicates that during this year the stock has performed better. The RS index with the industry is continuously rising and indicates better performance.

When a stock and it relative strength (in terms of the market) are plotted together on a graph, the relative strength generally reverses ahead of the stock prices. Analyst however, waits for the stock to reverse before acting on the basis of relative strength alone.

Earning:   Approval pending.