International E-publication: Publish Projects, Dissertation, Theses, Books, Souvenir, Conference Proceeding with ISBN.  International E-Bulletin: Information/News regarding: Academics and Research

Application of Technical Analysis in Indian Stock Market: An Empirical Study of CNX IT Index Stocks

    ,

Author Affiliations

  • 1Maharaja Ranjit Singh College of Professional Sciences, Indore, MP, India
  • 2Institute of Management Studies, Devi Ahilya Vishwavidyalaya, Indore, MP, India

Res. J. Management Sci., Volume 5, Issue (9), Pages 24-32, September,6 (2016)

Abstract

In order to forecast future price trends of the stocks and indices Technical Analysis is a practice of finding recurrent patterns of historical prices. It is stated that Weak Form of Efficient Market Hypothesis explains that historical price quotations of a security or index does not add value to the investors, as this type of information is reflected in the current price quotations of the security or index. Resultantly, all trading rules, tools and techniques of Technical Analysis developed based on historical information are of no use to predict the market. This rejects the usefulness of Technical Analysis. On the other hand, if their exist no Weak Form of Market Efficiency, it means future price movements can be determined by the information embedded in historical price series, consequently, Technical Analysis can be applied to determine the future share prices. The present study explored the application and importance of Technical Analysis in CNX IT Index constituents select companies of Indian Stock Market. For this, Efficiency of Weak Form of Market was tested by taking stock returns calculated on daily basis for the CNX IT Index constituent companies from April 2009 to March 2015, i.e., 7 years. Descriptive Statistics as well as One Sample Kolmogorov-Smirnov (KS) Test were applied to check the normality. Runs Test and Autocorrelation Test were applied to determine Weak Form of Stock Market Efficiency.

References

  1. Laveena and Malhotra, Meenakshi (2015)., Empirical Analysis of Efficient Market Hypothesis of Selected Indian Securities., Global Journal of Engineering Science and Research Management, 2(5), 11-26. Cited at: http://www.gjesrm.com/Issues%20PDF/Archive-2015/May-2015/5.pdf.
  2. Jethwani Kinjal and Achuthan Sarla (2013)., Stock Market Efficiency and Crisis: Evidence from India., Asia-Pacific Finance and Accounting Review, 1(2), 35-43, Cited in: http://administrator.asiapacific.edu/userfiles/Stock%20Market_Vol%20I%20No%20II.pdf.
  3. The Motley fool (2016)., Does an Efficient Market Render Technical Analysis Ineffective 3F?., The Motley fool.
  4. Thomas A.E. and Kumar M.C.D. (2010)., Empirical Evidence on Weak Form Efficiency of Indian Stock Market., ASBM Journal of Management, 3(1,2), 89-100.
  5. Suleman MT, Hamid K, S.Z. A. and Akkash R.S.I. (2010)., Testing the Weak Form of Efficient Market Hypothesis: Empirical Evidence from Asia-Pacific Markets., International Research Journal of Finance and Economics, 58, 121-133.
  6. Gupta Rakesh and Yang Junhao (2011)., Testing Weak Form Efficiency in the Indian Capital Market., International Research Journal of Finance and Economics, 75, 108-119.
  7. Kaur and Dhillon (2011)., Testing Weak Form of Efficiency Hypothesis for Indian Stock Market., Journal of Finance India, 25(3), 851-862.
  8. Garg Suman (2014)., Weak Form of Market Efficiency., Radix International Journal of Banking, Finance and Accounting, 3(2), 1-8, Cited at: http://www.rierc.org/banking/paper116.pdf.
  9. Shafi Mohammad (2014)., Testing of Market Efficiency in the Weak Form Taking CNX NIFTY as A Benchmark Index: A Study., Research Journal of Finance, 2(2), 1-20.
  10. Ishaq Ahmad Bhat, Suhail Qasim Mir and Faisal Nazir Zargar (2014)., A Comparative Analysis of the Efficiency of the Stock Markets of India and Pakistan., Global Journal of Finance and Management, 6 (2), 117-124,
  11. NSE (2016)., National Stock Exchange., NSE, India, www.nseindia.com.
  12. Totala N. K., Saluja H.S. and Totala Sunita (2014)., Testing Market Efficiency of Selected S&P CNX Nifty Companies: A Comparative Study Using Daily And Monthly Stock Returns., Altius Shodh Journal of Management and Commerce.