Stock Behavior of Indian Telecom Companies During Pre-2G-Scam and Post-2G-Scam

Abstract

The prosperity of all countries depends on its economic activities on a sustained basis. The starting point of all economic activities rests with the availability of capital which is limited for an organization. One of the major sources of capital is the investing public by making them share the ownership. In the modern times the control of an organization is separated from the ownership in the assumption that the controllers will act in the best interests of the owners. The owners benefit from the return on their initial investment in the form of dividend and increase in the market price of the equity they possess in the form of windfall profit. Thus many scholars believe that the objective of a firm is to maximize the market value of the firm. When the firm keeps doing well, the market price of the firm’s stocks also go up increasing the potential returns to the investors. But when the management, i.e. the controllers indulge themselves in scams or scandals, it not only affects the managers themselves but it affects the investors much more even leading to lack of confidence in the whole industry the firm is in. This paper attempts to study, using technical analysis, the behavior of the stocks of the top ten companies in the telecom industry in India during pre-2G-scam and post-2G-sacm. It was found that the share prices of not only the companies involved in the 2G scam but also the share price of the companies which are not involved in the 2G scam also declined after 2G scam. Also the investors had lost their trust on the entire telecom industry because of the 2G scam.

Keywords: Indian Telecom Companies, Stock Behaviour, Technical Analysis, Scam, 2G Scam, investment, charts, volume traded, Relative strength index, rate of change, simple moving average