project report risk and returns of securities

8/22/2019 Project Report Risk and Returns of Securities

1/93

RESEARCH REPORT

ON

RISK AND RETURNS OF

SECURITIES

(A case study of selected companies)

In The Partial Fulfilment Of the requirement for award

of the Degree of

Master of Business Administration (MBA)

1


2/93

CONTENTS

2


3/93

CHAPTER NO. DESCRIPTION

1. INTRODUCTION TO TOPIC

2. REVIEW OF LITERATURE

3 RESEARCH METHODOLOGY

a. Data sources

b. Research design

c. Data collection

d. Need of study

e. Objectives of study

f. Scope of study

g. Limitations of study

4 DATA ANALYSIS AND INTERPRETATION

5 FINDINGS AND SUGGESTIONS

BIBLIOGRAPHY

3


4/93

CHAPTER -1

INTRODUCTION

STATEMENT OF PROBLEM

4


5/93

The problem undertaken to study in the present project work is to calculate returns and

risk associated with different stocks listed on NSE Stock Exchange. Returns and Risk are

calculated to study the price movements in the stock market. After doing this project one

can make decisions regarding the investment in which company one can expect

INTRODUCTION

Investment is the employment of funds with the aim of achieving additional income or

growth in value. The essential quality of an investment is that it involves waiting for a

reward. It involves the commitment of resources which have been saved or put away

from current consumption in the hope that some benefits will accrue in future. The term

Investment does not appear to be as simple as it has been defined. Investment has been

further categorized by financial experts and economists. It has also often been confused

with the term speculation. The following discussion will give an explanation of the

various ways in which investment is related or differentiated from the financial and

economic sense and how speculation differs from investment. However, it must be

clearly established that investment involves long-term commitment.

RETURNS:

A major purpose of investment is to set a return of income on the funds invested. On a

bond an investor expects to receive interest. On a stock, dividends may be anticipated.

The investor may expect capital gains from some investments and rental income from

house property.

RISK:

In the investing world, the dictionary definition of risk is the chance that an

investments actual return will be different than expected. Technically, this is measured

in statistics by Standard Deviation. Risk means you have the possibility of losing some,

or even all, of our original investment.

5


6/93

Risk consists of 2 components:

1. Systematic risk (uncontrollable risk) non-diversifiable risk

2. Unsystematic risk (controllable risk) diversifiable risk

SYSTEMATIC RISK:

The risk that affects the entire market, the factors are beyond the control of the

corporate and the investor. They cannot be avoided by the investor. It is sub-divided

into.

a) Market risk

b) Interest rate risk

c) Purchase power risk

UNSYSTEMATIC RISK OF DIVERSIFIABLE RISK:

It is unique to the firm or industry. It stems from managerial inefficiency,

technological changes, consumer preferences, labour problems etc. The magnitude and

nature differs from firm to firm, industry to industry.

It can be classified into 2 types

1) Business risk

Internal risk

Fluctuations in sales

Research and development

Personal management

External risk (P,E,S,T factors)

2) Financial risk It is associated with the capital structure of the company.

RETURNS

6


7/93

A major purpose of investment is to set a return of income on the funds invested. On a

bond an investor expects to receive interest. On a stock, dividends may be anticipated.

The investor may expect capital gains from some investments and rental income from

house property. Return may take several forms.

Measurement of Returns

The purpose of investment is to get a return or income on the funds invested in different

financial assets. The most important characteristics of financial assets are the size and

variability of their future returns. Since the return on income varies, various statistical

techniques are used to measure it. Over the years, may methods were adopted for

quantifying returns. These are now categorized as traditional and modern techniques of

measurement.

Traditional Method of Measurement

Computation of yield to measure a financial assets return is the simplest and oldest

technique of measurement. Yield can be both expected or estimated and actual for a

particular period. The formula used to find yield is:

Expected Cash Income

a) Estimated Yield = ----------------------------

Current Price of Asset

Cash Income

b) Actual Yield = ---------------------

Amount Invested

The yield that is calculated is for a particular period to find out the return on the amount

that is invested. For example, the annual yield on the Unit Trust Certificate is the

dividend income divided by the amount invested.

7


8/93

Measuring Returns Improved Technique

The holding period yield is one of the new techniques in measuring returns. The

traditional methods did not provide a satisfactory returns measure. Some of the gaps that

were identified were: (a) that the traditional method does not distinguish between divided

and earnings portion that the traditional method does not distinguish between divided and

earnings portion that the company retains (Earnings Yield Method), (b) Dividend Yield

Method ignores the possibility of price appreciation on retained earnings. It is useful

only for those shareholders who wish to retain shares always and are not interested in

selling and anticipate that dividends are not going to change; (c) the yield to maturity is

useful only to those bond holders who will hold it to maturity. All investors may not hold

bonds till maturity for obvious reasons. These methods are thus known to serve a limited

purpose only. The better method measures return through the holding period yield. This

measure appears more rational and clearly defined. It serves two purposes: (a) It

measures that total return per rupee of the original investment, and (b) through this

method, comparisons can be drawn of any assets expected return. An asset can be

compared with other both historically and for future periods.

The holding period yield can be used for any asset. For example, returns from savings

accounts, stocks money, real estate and bonds can be compared through this measure.

The formula for the holding period yield is:

Income payments received during the year in Rs. + Capital change for the period in Rs.

Price in rupees of original investment at the beginning of period

A look at this formula shows that the Holding Period Yield (HPY) considers

everything the investor receives over the specified period during which the asset is held

relative to what was originally invested in the assets. It also considers all income

payments; and positive and negative capital changes during the period. These are then

measured relative to the original investment in rupees. The HPY also measures past

8


9/93

receipts of payments as well as for an unknown future. It is useful for comparing any

time period, it can be used on both Bond and Stocks.

Measure of Dispersion

Dispersion methods help to assess risk in receiving a reward or return on investment.

The greater the potential dispersion, the greater the risk. One of the simplest methods in

calculating dispersion is range. The range, however, has limited importance. It is useful

when there are small samples. It loses its effectiveness when the number of values in a

sample increases. The best and most effective method to find out how the data scattered

around a frequency distribution is to use the standard deviation method. This method is

related to the mean deviation and implies in this case the means as a point of reference

from which deviation occurs. The standard deviation is based on mean and it cannot

show any result without first finding out the mean. The standard deviation is recognized

by the following symbol. The standard deviation is also related to variance. Variance

is the square of standard deviation. In other words, standard deviation is the square root

of the variance. This relationship shows that they have similar statistical characteristics.

Therefore, standard deviation and variance are considered equivalent to each other as

measures of risk. For a security analyst they help in depicting dispersion of HPYs around

HPY.

There are 22 stock exchanges in India, the first being the Bombay Stock Exchange

(BSE), which began formal trading in 1875, making it one of the oldest in Asia. Over the

last few years, there has been a rapid change in the Indian securities market, especially in

the secondary market. Advanced technology and online-based transactions have

modernized the stock exchanges. In terms of the number of companies listed and total

market capitalization, the Indian equity market is considered large relative to the

countrys stage of economic development. The number of listed companies increased

from 5,968 in March 1990 to about 10,000 by May 1998 and market capitalization has

grown almost 11 times during the same period.

9


10/93

The debt market, however, is almost non-existent in India even though there has

been a large volume of Government bonds traded. Banks and financial institutions have

been holding a substantial part of these bonds as statutory liquidity requirement. The

portfolio restrictions on financial institutions statutory liquidity requirement are still in

place. A primary auction market for Government securities has been created and a

primary dealer system was introduced in 1995. There are six authorized primary dealers.

Currently, there are 31 mutual funds, out of which 21 are in the private sector. Mutual

funds were opened to the private sector in 1992. Earlier, in 1987, banks were allowed to

enter this business, breaking the monopoly of the Unit Trust of India (UTI), which

maintains a dominant position. Before 1992, many factors obstructed the expansion of

equity trading. Fresh capital issues were controlled through the Capital Issues Control

Act. Trading practices were not transparent, and there was a large amount of insider

trading. Recognizing the importance of increasing investor protection, several measures

were enacted to improve the fairness of the capital market. The Securities and Exchange

Board of India (SEBI) was established in 1988. Despite the rules it set, problems

continued to exist, including those relating to disclosure criteria, lack of Brokers, capital

adequacy, and poor regulation of merchant bankers and underwriters. There have been

significant reforms in the regulation of the securities market since 1992 in conjunction

with overall economic and financial reforms. In 1992, the SEBI Act was enacted giving

SEBI statutory status as an apex regulatory body. And a series of reforms was introduced

to improve investor protection, automation of stock trading, integration of national

markets, and efficiency of market operations. India has seen a tremendous change in the

secondary market for equity. Its equity market will most likely be comparable with the

worlds most advanced secondary markets within a year or two. The key ingredients that

underlie market quality in Indias equity market are:

Exchanges based on open electronic limit order book

Nationwide integrated market with a large number of informed traders and

fluency of short or long positions.

No counterparty risk.

10


11/93

Among the processes that have already started and are soon to be fully

implemented are electronic settlement trade and exchange-traded derivatives.

Before 1995, markets in India used open outcry, a trading process in which traders

shouted and hand signaled from within a pit. One major policy initiated by SEBI from

1993 involved the shift of all exchanges to screen-based trading, motivated primarily by

the need for greater transparency. The first exchange to be based on an open electronic

limit order book was the National Stock Exchange (NSE), which started trading debt

instruments in June 1994 and equity in November 1994. In March 1995, BSE shifted

from open outcry to a limit order book market. Currently, 17 of Indias stock exchanges

have adopted open electronic limit order. Before 1994, Indias stock markets were

dominated by BSE in other parts of the country.

Recent Developments and Policy Issues.

Financial industry did not have equal access to markets and was unable to

participate in forming prices, compared with market participants in Mumbai (Bombay).

As a result, the prices in markets outside Mumbai were often different from prices in

Mumbai. These pricing errors limited order flow to these markets.

Explicit nationwide connectivity and implicit movement toward one national

market has changed this situation. NSE has established satellite communications which

give all trading members of NSE equal access to the market. Similarly, BSE and the

Delhi Stock Exchange are both expanding the number of trading terminals located all

over the country. The arbitrages are eliminating pricing discrepancies between markets.

The Indian capital market still faces many challenges if it is to promote more efficient

allocation and mobilization of capital in the economy.

Firstly, market infrastructure has to be improved as it hinders the efficient flow ofinformation and effective corporate governance. Accounting standards will have to adapt

to internationally accept accounting practices. The court system and legal mechanism

should be enhanced to better protect small shareholders rights and their capacity to

monitor corporate activities.

11


12/93

Secondly, the trading system has to be made more transparent. Market

information is a crucial public good that should be disclosed or made available to all

participants to achieve market efficiency. SEBI should also monitor more closely cases of

insider trading.

Thirdly, India may need further integration of the national capital market

through consolidation of stock exchanges. The trend all over the world is to consolidate

and merge existing stock exchanges. Not all of Indias 22 stock exchanges may be able to

justify their existence. There is a pressing need to develop a uniform settlement cycle and

common clearing system that will bring an end to unnecessary speculation based on

arbitrage opportunities.

Fourthly, the payment system has to be improved to better link the banking and

securities industries. Indias banking system has yet to come up with good electronic

funds transfer (EFT) solutions. EFT is important for problems such as direct payments of

dividends through bank accounts, eliminating counterparty risk, and facilitating foreign

institutional investment. The capital market cannot thrive alone; it has to be integrated

with the other segments of the financial system. The global trend is for the elimination of

the traditional wall between banks and the securities market. Securities market

development has to be supported by overall macroeconomic and financial sector

environments. Further liberalization of interest rates, reduced fiscal deficits, fully market-

based issuance of Government securities and a more competitive banking sector will help

in the development of a sounder and a more efficient capital market in India. Capital

Market Reforms and Developments Reforms in the Capital Market Over the last few

years, SEBI has announced several far-reaching reforms to promote the capital market

and protect investor interests.

Reforms in the secondary market have focused on three main areas

structure and functioning of stock exchanges,

automation of trading and post trade systems,

And the introduction of surveillance and monitoring systems. Computerized

online trading of securities.

12


13/93

And settings up of clearing houses or settlement guarantee funds were made

compulsory for stock exchanges.

Stock exchanges were permitted to expand their trading to locations outside their

jurisdiction through computer terminals. Thus, major stock exchanges in India have

started locating computer terminals in far-flung areas, while smaller regional exchanges

are planning to consolidate by using centralized trading under a federated structure.

Online trading systems have been introduced in almost all stock exchanges. Trading

is much more transparent and quicker than in the past. Until the early 1990s, the trading

and settlement infrastructure of the Indian capital market was poor. Trading on all stock

exchanges was through open outcry, settlement systems were paper-based, and market

intermediaries were largely unregulated.

The regulatory structure was fragmented and there was neither comprehensive

registration nor an apex body of regulation of the securities market. Stock exchanges

were run as brokers clubs as their management was largely composed of brokers. There

was no prohibition on insider trading, or fraudulent and unfair trade practices. Since

1992, there has been intensified market reform, resulting in a big improvement in

securities trading, especially in the secondary market for equity. Most stock exchanges

have introduced online trading and set up clearing houses/corporations. A depository hasbecome operational for scrip less trading and the regulatory structure has been overhauled

with most of the powers for regulating the capital market vested with SEBI. The Indian

capital market has experienced a process of structural transformation with operations

conducted to standards equivalent to those in the developed markets. It was opened up for

investment by foreign institutional investors (FIIs) in 1992 and Indian companies were

allowed to raise resources abroad through Global Depository Receipts (GDRs) and

Foreign Currency Convertible Bonds (FCCBs). The primary and secondary segments of

the capital market expanded rapidly, with greater institutionalization and wider

participation of individual investors accompanying this growth. However, many

problems, including lack of confidence in stock investments, institutional overlaps, and

other governance issues, remain as obstacles to the improvement of Indian capital market

efficiency.

13


14/93

PRIMARY MARKET

Since 1991/92, the primary market has grown fast as a result of the removal of

investment restrictions in the overall economy and a repeal of the restrictions imposed by

the Capital Issues Control Act. In 1991/92, Rs62.15 billion was raised in the primary

market. This figure rose to Rs276.21 billion in 1994/95. Since 1995/1996, however,

smaller amounts have been raised due to the overall downtrend in the market and tighter

entry barriers introduced by SEBI for investor protection .SEBI has taken several

measures to improve the integrity of the secondary market. Legislative and regulatory

changes have facilitated the corporatization of stockbrokers. Capital adequacy norms

have been prescribed and are being enforced. A mark-to-market margin and intraday

trading limit have also been imposed. Further, the stock exchanges have put in place

circuit breakers, which are applied in times of excessive volatility. The disclosure of short

sales and long purchases is now required at the end of the day to reduce price volatility

and further enhance the integrity of the secondary market.

MARK-TO-MARKET MARGIN AND INTRADAY LIMIT

Under the current clearing and settlement system, if an Indian investor buys and

subsequently sells the same number of shares of stock during a settlement period, or sells

and subsequently buys, it is not necessary to take or deliver the shares. The difference

between the selling and buying prices can be paid or received. In other words, the

squaring-off of the trading position during the same settlement period results in non

delivery of the shares that the investor traded.

Thus, possible at a relatively low cost. FIIs and domestic institutional investors are,

however, not permitted to trade without delivery, since no delivery transactions are

limited only to individual investors. One of SEBIs primary concerns is the risk of

settlement chaos that may be caused by an increasing number of no delivery transactions

as the stock market becomes excessively speculative.

Accordingly, SEBI has introduced a daily mark-to-market margin and intraday

trading limit. The daily mark-to-market margin is a margin on a brokers daily position.

14


15/93

The intraday trading limit is the limit to a brokers intraday trading volume. Every broker

is subject to these requirements.

Each stock exchange may take any other measures to ensure the safety of the

market. BSE and NSE impose on members a more stringent daily margin, including one

based on concentration of business. A daily mark-to-market margin is 100 percent of the

notional loss of the stockbroker for every stock, calculated as the difference between

buying or selling price and the closing price of that stock at the end of that day. However,

there is a threshold limit of 25 percent of the base minimum capital plus additional capital

kept with the stock exchange or Rs1 million, whichever is lower. Until the notional loss

exceeds the threshold limit, the margin is not payable.

This margin is payable by a stockbroker to the stock exchange in cash or as a bank

guarantee from a scheduled commercial bank, on a net basis. It will be released on the

pay-in day for the settlement period. The margin money is held by the exchange for 6-12

days. This cost the broker about 0.4-1.2 percent of the notional loss, assuming that the

brokers funding cost is about 24-36 percent (Endo 1998).

Thus, speculative trading without the delivery of shares is no longer

cost-free. Each brokers trading volume during a day is not allowed to exceed the

intraday trading limit. This limit is 33.3 times the base minimum capital deposited with

the exchange on a gross basis, i.e., purchase plus sale. In the event of brokers wishing to

exceed this limit, they have to deposit additional capital with the exchange and this

cannot be withdrawn for six months.

15


16/93

INDUSTRY PROFILE

Stock exchange is an organized market place where securities are traded. These securities

are issued by the government, semi-government bodies, public sector undertakings and

companies for borrowing funds and raising resources. Securities are defined as any

monetary claims (promissory notes or I.O.U) and also include shares, debentures, bonds

and etc., if these securities are marketable as in the case of the government stock, they are

transferable by endorsement and alike movable property. They are tradable on the stock

exchange. So, are the case shares of companies.

Under the Securities Contract Regulation Act of 1956, securities trading is

regulated by the Central Government and such trading can take place only in stock

exchanges recognized by the government under this Act. As referred to earlier there are

at present 23 such recognized stock exchanges in India. Of these, major stock exchanges,

like Bombay Stock Exchange, National Stock Exchange, Inter-Connected Stock

Exchange, Calcutta, Delhi, Chennai, Hyderabad and Bangalore etc. are permanently

recognized while a few are temporarily recognized. The above act has also laid down that

trading in approved contract should be done through registered members of the exchange.

As per the rules made under the above act, trading in securities permitted to be traded

would be in the normal trading hours (10 A.M to 3.30 P.M) on working days in thetrading ring, as specified for trading purpose.Contracts approved to be traded are the

following:

Spot delivery deals are for deliveries of shares on the same day or the next day as

the payment is made.

Hand deliveries deals for delivering shares within a period of 7 to 14 days from

the date of contract.

Delivery through clearing for delivering shares with in a period of two months

from the date of the contract, which is now reduce to 15 days.(Reduced to 2 days in

demat trading)

Special Delivery deals for delivering of shares for specified longer periods as may

be approved by the governing board of the stock exchange.

16


17/93

Except in those deals meant for delivery on spot basis, all the rest are to be put

through by the registered brokers of a stock exchange. The securities contracts

(Regulation) rules of 1957 laid down the condition for such trading, the trading hours,

rules of trading, settlement of disputes, etc. as between the members and of the members

with reference to their clients.

HISTORY OF STOCK EXCHANGES IN INDIA

The origin of the Stock Exchanges in India can be traced back to the later half of 19th

century. After the American Civil War (1860-61) due to the share mania of the public,

the number of brokers dealing in shares increased. The brokers organized an informal

association in Mumbai named The Native Stock and Share Brokers Association in

1875.later evolved as Bombay stock exchange. Increased activity in trade and commerce

during the First World War and Second World War resulted in an increase in the stock

trading. The Growth of Stock Exchanges suffered a set after the end of World War.

Worldwide depression affected those most of the Stock Exchanges in the early stages had

a speculative nature of working without technical strength. After independence,

government took keen interest to regulate the speculative nature of stock exchange

working. In that direction, securities and Contract Regulation Act 1956 was passed, this

gave powers to Central Government to regulate the stock exchanges. Further to develop

secondary markets in the country, stock exchanges established at Mumbai, Chennai,

Delhi, Hyderabad, Ahmedabad and Indore. The Bangalore Stock Exchange was

recognized in 1963. At present there are 23 Stock Exchanges. Till recent past, floor

trading took place in all Stock Exchanges. In the floor trading system, the trade takes

place through open outcry system during the official trading hours. Trading posts are

assigned for different securities whereby and sell activities of securities took place. This

system needs a face to face contact among the traders and restricts the trading

volume. The speed of the new information reflected on the prices was rather than the

investors. The Setting up of NSE and OTCEI (Over the counter exchange of India with

the screen based trading facility resulted in more and more Sock exchanges turning

towards the computer based trading. BSE introduced the screen based trading system in

1995, which known as BOLT (Bombay on line Trading. System) Madras Stock

17


18/93

Exchange introduced Automated Network Trading System (MANTRA) on October 7,

1996 Apart from Bombay Stock Exchanges have introduced screen based trading.

FUNCTION OF STOCK EXCHANGE

MAINTAIN ACTIVE TRADING:-. Shares are traded on the stock exchanges,

enabling the investors to buy and sell securities. The prices may vary from transaction to

transaction. A continuous trading increases the liquidity or marketability of the shares

traded on the stock exchanges

Fixation of Prices: Price is determined by the transactions that flow from investors

demand and the suppliers preferences. Usually the traded prices are made known to the

public. This helps the investors to make the better decision.

Ensures safe and fair dealings: The rules, regulations and bylaws of the Stock

Exchanges provide a measure of safety to the investors. Transactions are conducted

under competitive conditions enabling the investors to get a fair deal.

Aids in financing the Industry: A continuous market for shares provides a

favorable climate for raising capital. The negotiability and transferability of the

securities, investors are willing to subscribe to the initial public offering (IPO). Thisstimulates the capital formation.

Dissemination of Information: Stock Exchanges provide information through their

various publications. They publish the share prices traded on their basis along with the

volume traded. Directory of Corporate Information is useful for the investors

assessment regarding the corporate. Handouts,handbooks and pamphlets provide

information regarding the functioning of the Stock Exchanges.

Performance Inducer: The prices of stocks reflect the performance of the traded

companies. This makes the corporate more concerned with its public image and tries to

maintain good performance.

18


19/93

Self-regulating organization:

The Stock Exchanges monitor the integrity of the members, brokers, listed companies

and clients. Continuous internal audit safeguards the investors against unfair trade

practices. It settles the disputes between member brokers, investors and brokers.

REGULATORY FRAME WORK

This Securities Contract Regulation Act, 1956 and Securities and Exchange board of

India (SEB1) Act, 1992, provides a comprehensive legal framework. A 3-tier regulatory

structure comprising the ministry of finance, SEB1 and the Governing Boards of the

Stock Exchanges regulates the functioning of Stock Exchanges.

Ministry of finance

The Stock Exchange division of the Ministry of Finance has powers

related to the application of the provision of the SCR Act and licensing

of dealers in the other area. According to SEBI Act, The Ministry of

Finance has the appellate and the supervisory power over the SEBI. It

has powered to grant recognition to the Stock Exchange and regulation

of their operations. Ministry of Finance has the power to approve theappointments of executives chiefs and the nominations of the public

representatives in the government Boards of the Stock Exchanges. It

has the responsibility of preventing undesirable speculation.

The Securities and Exchange Board of India

The Securities and Exchange Board of India even though established in

the year 1988. Received statutory powers only on 30th January 1992.Under the SEBI Act, a wide variety of powers are vested in the hands of

SEBI. SEBI has the powers to regulate the business of Stock

Exchanges, other security and mutual funds. Registration and

regulation of market intermediaries are also carried out by SEBI. It has

responsibility to prohibit the fraudulent unfair trade practices and

19


20/93

insider dealings. Takeovers are also monitored by the SEBI has the

multi pronged duty to promote the healthy growth of the capital

market and protect the investors.

20


21/93

The Governing Board of Stock Exchanges:

The Governing Board of the Stock Exchange consists of elected members of directors,

government nominees and public representatives. Rules, by laws and regulations of the

Stock Exchange substantial powers to the executive director for maintaining efficient and

smooth day-to day functioning of Stock Exchange. The Governing Board has the

responsibility to maintain and orderly and well-regulated market.

The Governing body of the Stock Exchange consists of 13 members of which

Six members of the Stock Exchange are elected by the members of the Stock

Exchange.

Central Government nominates not more than three members.

The board nominates three public representatives.

SEBI nominates persona not exceeding three and

The Stock Exchange appoints one Executive Director.

One third of the elected members retire at annual general meeting (AGM). The retired

member can offer himself for election if he is not elected for two consecutive years. If a

member serves in the governing body for two years consecutively, he should refrain

offering himself for another two years.

The members of the governing body elect the president and vice-president. It needs to

approval from the Central Government or the Board. The office tenure for the president

and vice-president is on year. They can offer themselves for re-election, if they have not

held for two consecutive years. In that case they can offer themselves for re-election after

a gap of one-year period.

21


22/93

NATIONAL STOCK EXCHANGE

The National Stock Exchange (NSE) of India became operational in the capital market

segment on third November 1994 in Mumbai. The genesis of the NSE lies in the

recommendations of the pherwani committee (1991). Apart from the NSE. It had

recommended for the establishment of National Stock market System also. The

committee pointed out some major defects in the Indian stock market.

The defects specified are.

Lack of liquidity in most of the markets in terms of depth and breadth.

Lack of ability to develop markets for debt.

Lack of infrastructure facilities and outdated trading system.

Lack of transparency in the operations that affect investors confidence.

Outdated settlement system that are inadequate to cater to the growing volume,

leading to delays.

Lack of single market due to the inability of various stock exchanges to function

cohesively with legal structure and regulatory framework.

These factors led to the establishment of the NSE.

The main objectives of NSE are as follows

To establish a nationwide trading facility for equities, debt and hybrid instruments

To ensure equal access investors all over the country through appropriate

communication network.

To provide a fair, efficient and transparent securities market to investors using an

electronic communication network.

To enable shorter settlement cycle and book entry settlement system.

To meet current international standards of securities market.

Promoters of NSE: IDBI, ICICI, IFCI, LIC, GIC, SBI, Bank of Baroda. Canara Bank,

Corporation Bank, Indian Bank, Oriental Bank of Commerce. Union Bank of India,

Punjab National Bank, Infrastructure Leasing and Financial Services, Stock Holding

Corporation of India and SBE capital market are the promoters of NSE.

22


23/93

MEMBERSHIP

Membership is based on factors such as capital adequacy, corporate structure, track

record, education, experience etc. Admission is a two-stage process with applicants

requiring going through a written examination followed by an interview. A committee

consisting of experienced people from the industry to assess the applicants capability to

operate as an exchange member, interviews candidates. The exchange admits members

separately to Wholesale Debt Market (WDM) segment and the capital market segment.

Only corporate members are admitted on the debt market segment whereas individuals

and firms are also eligible on the capital market segment. Eligibility criteria for trading

membership on the segment of WDM are as follows.

The persons eligible to become trading members are bodies corporate, companies

Institutions including subsidiaries of banks engaged in financial services and such

other

Persons or entities as may be permitted form time to time by RBI/SEBI.

The whole-time directors should possess at least two years experience in any

activity related to banking or financial services or treasury.

The applicant must possess a minimum net worth of Rs.2 cores.

The applicant must be engaged solely in the business of securities and must not be

engaged in any fund-based activities.

The securities market achieves one of the most important functions of channeling idle

resources to productive resources or from less productive resources to more productive

resources. Hence in the broader context the people who save and investors who invest

focus more towards the economys abilities to invest and save respectively. This

enhances savings and investments in the economy, the two pillars for economic growth.

The Indian Capital Market has come a long way in this process and with a strong

regulator it has been able to usher an era of a modern capital market regime. The past

decade in many ways has been remarkable for securities market in India. It has grown

exponentially as measured in terms of amount raised from the market, the number of

23


24/93

listed stocks, market capitalization, trading volumes and turnover on stock exchanges,

and investor population. The market has witnessed fundamental institutional changes

resulting in drastic reduction in transaction costs and significant improvements in

efficiency, transparency and safety.

Dependence on Securities Market

Three main sets of entities depend on securities market- the corporate, the government &

households. While the corporate and governments raise resources from the securities

market to meet their obligations, the households invest their savings in securities.

Primary Market & Secondary Market

The securities market comprises two segments- primary market (new issues, offer for

sale) & secondary market (trading of stocks). There are two major types of issuers who

issue securities. The corporate entities issue mainly debt and equity instruments (shares,

debentures, etc.), while the governments (central and state governments) issue debt

securities (dated Securities, treasury bills). The two major exchanges, namely the NSE

and the BSE provide trading of securities.

Laws governing capital market

The four main legislations governing the securities market are:

a) The SEBI Act, 1992 which establishes SEBI to protect investors and develop and

regulate the Markets.

b) The Companies Act, 1956, which sets out the code of conduct for the corporate

sector in relation to issue, allotment and transfer of securities, and disclosures to be made

in public issues.

c) The Securities Contracts (Regulation) Act, 1956, read with the Securities

Contracts (Regulation) Rules, 1957 which provide for regulation of transactions in

securities through control over stock exchanges, and

d) The Depositories Act, 1996 which provides for electronic maintenance and

transfer of ownership of demat securities.

Regulators

24


25/93

SEBI is the primary regulator of the Securities Market and the entities operating therein.

The SEBI Act and the Depositories Act are mostly administered by SEBI. The rules

under the securities laws are framed by government and regulations by SEBI. All these

are administered by SEBI. The powers under the Companies Act relating to issue and

transfer of securities and non-payment of dividend are administered by SEBI in case of

listed public companies and public companies proposing to get their securities listed

Nifty 50

The 50 stocks that were most favored by institutional investors in the 1960s and 1970s.

Companies in this group were usually characterized by consistent earnings growth and

high P/E ratios. The Nifty-50 stocks got their notoriety in the bull markets of the 1960s

and early 1970s. They became known as "one-decision" stocks because investors were

told. They could buy and hold forever.

Examples of Nifty-50 stocks included General Electric, Coca-Cola, and IBM. However,

part of this list included companies that have been troubled in the last decade, such as

Xerox and Polaroid.

Nifty Junior

The CNX Nifty Junior is an index for companies on the National Stock Exchange of

India. It consists of 50 companies representing approximately 10% of the traded value of

all stocks on theNational Stock Exchange of India. The CNX Nifty Junior is owned and

operated by India Index Services and Products Ltd. It is quoted using the symbol

NSMIDCP.

The CNX Nifty Junior and the S&P CNX Nifty represent the 100 most liquid

commodities traded on the National Stock Exchange of India. Together, they form a

disjoint set; that is to say, no one company can be listed on both indices simultaneously.

Equity

25
http://www.answers.com/topic/stock-market-indexhttp://www.answers.com/topic/national-stock-exchange-of-indiahttp://www.answers.com/topic/national-stock-exchange-of-indiahttp://www.answers.com/topic/national-stock-exchange-of-indiahttp://www.answers.com/topic/india-index-services-and-productshttp://www.answers.com/topic/s-p-cnx-niftyhttp://www.answers.com/topic/national-stock-exchange-of-indiahttp://www.answers.com/topic/disjoint-setshttp://www.answers.com/topic/stock-market-indexhttp://www.answers.com/topic/national-stock-exchange-of-indiahttp://www.answers.com/topic/national-stock-exchange-of-indiahttp://www.answers.com/topic/national-stock-exchange-of-indiahttp://www.answers.com/topic/india-index-services-and-productshttp://www.answers.com/topic/s-p-cnx-niftyhttp://www.answers.com/topic/national-stock-exchange-of-indiahttp://www.answers.com/topic/disjoint-sets


26/93

Stock or any other security representing an ownership interest.

On the balance sheet, the amount of the funds contributed by the owners (the

stockholders) plus the retained earnings (or losses). Also referred to as "shareholder's

equity. In the context of margin trading, the value of securities in a margin account

minus what has been borrowed from the brokerage. In the context of real estate, the

difference between the current market value of the property and the amount the owner

still owes on the mortgage. Thus, it is the amount, if any; the owner would receive after

selling a property and paying off the mortgage.

Equity is a term whose meaning depends very much on the context. In general,

you can think of equity as ownership in any asset after all debts associated with that asset

are paid off. For example, a car or house with no outstanding debt is considered the

owner's equity since he or she can readily sell the items for cash. Stocks are equity

because they represent ownership of a company, whereas bonds are classified as debt

because they represent an obligation to pay and not ownership of assets.

Market Value

The current quoted price at which investors buy or sell a share of common stock

or a bond at a given time. Also known as "market price The market capitalization plus

the market value of debt. Sometimes referred to as "total market value".

In the context of securities, market value is often different from book value because the

market takes into account future growth potential. Most investors who use fundamental

analysis to pick stocks look at a company's market value and then determine whether or

not the market value is adequate or if it's undervalued in comparison to its book value, net

assets or some other measure.

Stock

26
http://www.investopedia.com/terms/m/marketvalue.asphttp://www.investopedia.com/terms/m/marketvalue.asphttp://www.investopedia.com/terms/m/marketvalue.asphttp://www.investopedia.com/terms/m/marketvalue.asp


27/93

A type of security that signifies ownership in a corporation and represents a claim on part

of the corporations assets and earnings. There are two main types of stock: common and

preferred. Common stock usually entitles the owner to vote at shareholders' meetings and

to receive dividends. Preferred stock generally does not have voting rights, but has a

higher claim on assets and earnings than the common shares. For example, owners of

preferred stock receive dividends before common shareholders and have priority in the

event that a company goes. Bankrupt and is liquidated. Also known as

"shares" or "equity".

A holder of stock (a shareholder) has a claim to a part of the corporation's assets and

earnings. In other words, a shareholder is an owner of a company. Ownership is

determined by the number of shares a person owns relative to the number of outstanding

shares. For example, if a company has 1,000 shares of stock outstanding and one person

owns 100 shares, that person would own and have. Claim to 10% of the companys assets

Stocks are the foundation of nearly every portfolio. Historically, they have outperformed

most other investments over the long run.

Shareholder

Any person, company, or other institution that owns at least 1 share in a company. A

shareholder may also be referred to as a stockholder.

Shareholders are the owners of a company. They have the potential to profit if the

company does well, but that comes with the potential to lose if the company does poorly.

Share

A unit of ownership interest in a corporation or financial asset. While owning shares in

a business does not mean that the shareholder has direct control over the business's day-

to-day operations, being a shareholder does entitle the possessor to an equal distribution

in any profits, if any are declared in the form of dividends. The two main types of shares

are common shares and preferred shares.

In the past, shareholders received a physical paper stock certificate that indicated that

they owned "x" shares in a company. Today, brokerages have electronic records that

27


28/93

show ownership details. Owning a paperless share makes conducting trades a simpler and

more streamlined process, which is a far cry from the days were stock certificates needed

to be taken to a. Brokerage before a trade could be conducted. While shares

are often used to refer to the stock of a corporation, shares can also represent ownership

of other classes of financial assets, such as mutual funds.

Risk- Risk is defined as uncertainty in outcomes

The chance that an investment's actual return will be different than expected. This

includes the possibility of losing some or all of the original investment. It is usually

measured by calculating the standard deviation of the historical returns or average

returns of a specific investment. A fundamental idea in finance is the relationship

between risk and return. The greater the amount of risk that an investor is willing to take

on, the greater the potential return. The reason for this is that investors need to. be

compensated for taking on additional risk

Stock Option

A privilege, sold by one party to another, that gives the buyer the right, but not the

obligation, to buy (call) or sell (put) a stock at an agreed-upon price within a. certain

period or on a specific date. In the U.K., it is known as a "share option. American

options can be exercised anytime between the date of purchase and the expiration date.

European options may only be redeemed at the expiration date. Most exchange-traded

stock options are American.

Security

An instrument representing ownership (stocks), a debt agreement (bonds), or the rights to

ownership (derivatives).A security is essentially a contract that can be assigned a value

Andrade.

Examples of a security include a note, stock, preferred share, bond, debenture, option,

future, swap, right, warrant, or virtually any other financial asset.

Closing Price

28


29/93

The final price at which a security is traded on a given trading day. The closing price

represents the most up-to-date valuation of a security until trading commences again on

the next trading day.

CHAPTER-3

REVIEW

OF

LITERATURE

29


30/93

REVIEW OF LITERATURE

Dunn and Theisen (1983) rank the annual performance of 201 institutional portfolios

for the period 1973 through 1982 without controlling for fund risk. They found noevidence that funds performed within the same quartile over the ten-year period. They

also found that ranks of individual managers based on 5-year compound returns revealed

no consistency.

Grinblatt and Titman (1992) analyze performance of 279 funds over the period of 1975

to 1984 using a benchmark technique and find evidence that performance differences

between funds persists over time.

Hendricks, Patel, and Zeckhauser (1993) study 165 no-load growth-oriented funds

over the period 1974 to 1988 and obtain similar results. In a study of 728 mutual fund

returns over the period 1976 to 1988.

Volkman and Wohar (1995) extend this analysis to examine factors that impact

performance persistence. Their data consists of 322 funds over the period 1980 to 1989,

and shows performance persistence is negatively related to size and negatively related to

levels of management fees.

Bauman and Miller (1995) studied the persistence of pension and investment fund

performance by type of investment organization and investment style. They employed a

quartile ranking technique because they noted that "investors pay particular attention to

consultants' and financial periodicals' investment performance rankings of mutual funds

and pension funds" (Bauman & Miller, 1995, p. 79). They found that portfolios managed

by investment advisors showed more consistent performance (measured by quartile

rankings) over market cycles and that funds managed by banks and insurance companies

showed the least consistency. They suggest that this result may be caused by a higher

turnover in the decision-making structure in these less consistent funds. This study

controls for the effects of turnover of key decision makers by restricting the sample to

those funds with the same manager for the entire period of study.

30


31/93

Kahn and Rudd 1995 study of 300 equity funds and 195 bond funds between 1983 and

1993, only the bond funds show evidence of persistence.

Car hart (1997) shows that expenses and common factors in stock returns such as beta,

market capitalization, one-year return momentum, and whether the portfolio is value or

growth oriented "almost completely" explain short term persistence in risk-adjusted

returns. He concludes that his evidence does not "support the existence of skilled or

informed mutual fund portfolio managers".

Detzel and Weigand (1998) use a regression residual technique to control for the effects

of investment style, size and expense ratios. They find, after controlling for these

variables, no evidence of performance persistence.

Mishra (2002) measured mutual fund performance using lower partial moment. In this

paper, measures of evaluating portfolio performance based on lower partial moment are

developed. Risk from the lower partial moment is measured by taking into account only

those states in which return is below a pre-specified target rate like risk-free rate.

Jack L. Treynor has suggested a new predictor of mutual fund performance, one that

differs from virtually all those used previously by incorporating the volatility of a fund's

return in a simple yet meaningful manner.

S.Narayan Rao evaluated performance of Indian mutual funds in a bear market through

relative performance index, risk-return analysis, Treynors ratio, Sharpes ratio, Sharpes

measure , Jensens measure, and Famas measure. The study used 269 open-ended

schemes (out of total schemes of 433) for computing relative performance index. Then

after excluding funds whose returns are less than risk-free returns, 58 schemes are finally

used for further analysis. The results of performance measures suggest that most of

mutual fund schemes in the sample of 58 were able to satisfy investors expectations by

giving excess returns over expected returns based on both premium for systematic risk

and total risk.

31


32/93

CHAPTER-4

RESEARCH

METHODOLOGY

32


33/93

RESEARCH METHODOLOGY

Research project has a specified framework for collecting the data in an effect manner.

Such framework is called Research Design. The research process consisted of

following steps:

Developing the Research Plan:

It is very important to researching anything to know about its main sources where we get

the main information regarding the research plan. The development of research plan has

following steps:

Data Sources:

There are two types of data were taken into consideration i.e. Secondary data and primary

data. The secondary data has been used to make the analysis because lack of sufficient

time and resources to collect the primary data.

Secondary Data:

Secondary data is that data which is already existed. This is indirect collection of data

from sources containing past or recent past information like:-

Annual reports,

Balance sheet,

Books,

Newspapers and Magazines

and Other companys publications.

Research Design-:Research design specifies the methods and procedures for

conducting a particular study. A research design is the arrangement of conditions for

collection and analysis of the data in a manner that aims to combine relevance to the

research purpose with economy in procedure. Research design is broadly classified into

three types as

Exploratory Research Design

Descriptive Research Design

Causal Research Design

I have chosen the descriptive research design.

33


34/93

DESCRIPTIVE RESEARCH DESIGN:

Descriptive research studies are those studies which are concerned with described the

characteristics of particular individual. In descriptive as well as in diagnostic studies, the

researcher must be able to define clearly, what he wants to measure and must find

adequate methods for measuring it along with a clear cut definition of population he want

to study. Since the aim is to obtain complete and accurate information in the said studies,

the procedure to be used must be carefully planned. The research design must make

enough provision for protection against bias and must maximize reliability, with due

concern for the economical completion of the research study.

NEED OF THE STUDY

Stock Markets have existed in India for a very long time yet the professionals in the field

of finance talking negatively about these instruments. The reason why I bring it up again

is that it is very important to understand what the old system was verse the new the old

system were based on trust. They were closed group system and hence deviation from

truly competitive markets. Such closed groups are vulnerable to problem when the

demand of the economy reach beyond the capacity of the group and group has expended

without open and transparent criteria for entry, the net work of trust gets disrupted, with

the result that the system is disrupted by frauds. On the other hand, the modern market

place of Stock Markets, having well developed risk management, transparent rules for

entry and stringent regulation, is faceless. That the old type system had to transform into

a new is definitely clear they have played a very important role in the past. In is merely

that had to modern markets to keep up with the demand of the times.

34


35/93

OBJECTIVE OF THE STUDY

The objectives aim to highlight the reasons how important is the financial system and

financial statement for an organization or company. There are various objectives of the

study are as follows:

1. The main objective of this project is to analyze the price fluctuations of various

companies.

2. To observe the relation between Returns and Risk in the yearly fluctuations in

prices.

SCOPE OF THE STUDY

The present study has been undertaken to observe the risk and returns associated with few

selected stocks. The scope of the study consists of 15 Company stocks from different

sectors like infrastructure, Pharmacy, Automobile, Power, Public Sector and Energy etc.,

the scope of the study is confined to 50 Companies

LIMITATIONS

This project report data collected from secondary sources only.

This project analysis report may not be applicable in all equity markets.

Project took only 15 companies of NSE for equity analysis. It will not applicable

to total NSES Nifty Index.

The accuracy of the study is based on the accuracy of the data presented in the

NSE listings.

35


36/93

Detailed study of topic was not possible due to limited size of the project. The

time taken for the study is limited.

CHAPTER-5

DATA ANALYSIS

&

INTERPRETATION

36


37/93

ABB RETURNS FOR THE YEAR 2011

Month Start End Returns Avg.Ret

Std.

Deviation Variance

January 454 485.15

0.06861233

5 0.054568

0.01404433

5 0.000197243

February 471.05 367.2 -0.22046492 0.054568 -0.27503292 0.075643106

March 370 426.7

0.15324324

3 0.054568

0.09867524

3 0.009736804

April 426.15 487

0.14279009

7 0.054568

0.08822209

7 0.007783138

May 490 650.95

0.32846938

8 0.054568

0.27390138

8 0.07502197

June 666 778.4

0.16876876

9 0.054568

0.11420076

9 0.013041816

July 780 700.6 -0.10179487 0.054568 -0.15636287 0.024449348

August 695 758.7

0.09165467

6 0.054568

0.03708667

6 0.001375422

September 764.95 784.45

0.02549186

2 0.054568 -0.02907614 0.000845422

October 785.1 769.55 -0.01980639 0.054568 -0.07437439 0.00553155

November 745.35 741.05 -0.0057691 0.054568 -0.0603371 0.003640566

December 749.4 767.1 0.02361889 0.054568 -0.0309491 0.000957847

37


38/93

5

Total

0.65481397

9 0.218224232

Standard Deviation 0.134853

CALCULATION OF BETA

Price ofShare

Return (x) X2 Sensex y y2 xy

232.47518327.7

6

218.25

-0.0611

90.0037441

4 17823.4

-0.027518

90.000757

290.0016

84

225.20.0318

440.0010140

5419445.2

20.090993

860.008279

8830.0028

98

288.4250.2807

50.0788208

1219135.9

6

-0.015904

20.000252

942

-0.0044

7

356.2250.2350

70.0552577

9918503.2

8

-0.033062

40.001093

12

-0.0077

7

381.5250.0710

230.0050441

9918845.8

70.018515

10.000342

8090.0013

15

434.075

0.1377

37

0.0189714

03 18197.2

-0.034419

7

0.001184

719

-0.0047

4

522.4250.2035

360.0414270

0716676.7

5

-0.083554

10.006981

281

-0.0170

1

576.550.1036

030.0107336

6216453.7

6

-0.013371

30.000178

792

-0.0013

9

604.950.0492

590.0024264

0217705.0

10.076046

450.005783

0620.0037

46

38


39/93

616.0250.0183

070.0003351

5716123.4

6

-0.089327

80.007979

46

-0.0016

4

655.6250.0642

830.0041323

1815454.9

2

-0.041463

80.001719

247

-0.0026

7

Sum1.134

2230.221906

953194364

.83

-0.15306

680.034552

606

-0.030

03

=nXY(x)(y)/nx2(x)2

-1.613265

8

From the analysis we find that the value of beta is -.6132658 and beta is here

negative it shows that the return of sensex and return of stock have the

negative relationship.

This also indicate that if sensex is increase by 10% then stock is decreased

by around 6%

39


40/93

BHARATI AIRTEL RETURNS FOR THE YEAR 2011


Std.

Deviation Variance

January 715 633.95 -0.11335664 -0.0495 -0.06385664 0.004077671

February 629.7 638.5

0.01397490

9 -0.0495

0.06347490

9 0.004029064

March 632.7 625.75 -0.01098467 -0.0495

0.03851533

1 0.001483431

April 626.4 752.75

0.20170817

4 -0.0495

0.25120817

4 0.063105547

May 765.35 820.15

0.07160122

8 -0.0495

0.12110122

8 0.014665507

June 870 802.15 -0.07798851 -0.0495 -0.02848851 0.000811595

July 803.15 410.1 -0.48938554 -0.0495 -0.43988554 0.193499292

August 418 424.6

0.01578947

4 -0.0495

0.06528947

4 0.004262715

September 418.65 418.75

0.00023886

3 -0.0495

0.04973886

3 0.002473954

October 426 292.85 -0.31255869 -0.0495 -0.26305869 0.069199872

November 292 299.55

0.02585616

4 -0.0495

0.07535616

4 0.005678552

December 304.9 329.75

0.08150213

2 -0.0495

0.13100213

2 0.017161559

Total -0.5936031 0.380448759


40


41/93

CALCULATION OF BETA

Price ofShare

Return (x) X2

Sensex y y2 xy

674.47518327.

76

634.1

-0.0598

60.0035

8317823.

4

-0.0275

20.0007

570.0016473

2

629.225

-0.0076

95.91E-

0519445.

220.0909

940.0082

8

-0.0006995

66

689.5750.0959

120.0091

9919135.

96-

0.01590.0002

53

-0.0015253

95

792.750.1496

210.0223

8618503.

28

-0.0330

60.0010

93

-0.0049468

28

836.0750.0546

520.0029

8718845.

870.0185

150.0003

430.0010118

78

606.625

-0.2744

40.0753

1618197.

2

-0.0344

20.0011

850.0094460

54

421.3-

0.30550.0933

3116676.

75

-0.08355

0.006981

0.025525913

418.7

-0.0061

73.81E-

0516453.

76

-0.0133

70.0001

798.25194E-

05

359.425

-0.1415

70.0200

4217705.

010.0760

460.0057

83

-0.0107658

3

295.775

-0.1770

90.0313

616123.

46

-0.0893

30.0079

790.0158189

22

317.3250.0728

590.0053

0815454.

92

-0.0414

60.0017

19

-0.0030210

29

Sum

-0.599

270.263

61119436

4.8

-0.153

070.034

5530.032573

957

=nXY-(x)(y)/nx2- -

41


42/93

(x)20.0030

1

From the analysis we find that the value of beta is -0.00301. and beta is here




by around 0.03%

BHEL RETURNS FOR THE YEAR 2011


Std.

Deviation Variance

January 1372 1320.8 -0.03731778 0.049991 -0.08730878 0.007622824

February 1315 1403.85 0.06756654 0.049991 0.01757554 0.0003089

March 1385 1510.55

0.09064981

9 0.049991

0.04065881

9 0.00165314

April 1520 1655.7

0.08927631

6 0.049991

0.03928531

6 0.001543336

May 1703.65 2178.15

0.27851964

9 0.049991

0.22852864

9 0.052225343

June 2134.6 2204.05 0.03253537 0.049991 -0.01745563 0.000304699

42


43/93

July 2229 2230.3

0.00058322

1 0.049991 -0.04940778 0.002441129

August 2250 2309.5

0.02644444

4 0.049991 -0.02354656 0.00055444

September 2319 2328.85 0.00424752 0.049991 -0.04574348 0.002092466

October 2301 2217.8 -0.03615819 0.049991 -0.08614919 0.007421683

November 2209.95 2243.75

0.01529446

4 0.049991 -0.03469654 0.00120385

December 2249.75 2403.3

0.06825202

8 0.049991

0.01826102

8 0.000333465

Total

0.59989339

5 0.077705274


CALCULATION OF BETA

Price ofShare

Return (x) X2

Sensex y y2 xy

1346.418327.

76

1359.4250.0096

749.36E-

0517823.

4

-0.0275

20.0007

57

-0.0002662

16

1447.7750.0649

910.0042

2419445.

220.0909

940.0082

80.0059137

561587.85 0.0967

520.0093

6119135.

96-

0.01590.0002

53-

0.0015387

43


44/93

58

1940.90.2223

450.0494

3718503.

28

-0.0330

60.0010

93

-0.0073512

4

2169.3250.1176

90.0138

5118845.

870.0185

150.0003

430.0021790

46

2229.650.0278

080.0007

7318197.

2

-0.0344

20.0011

85

-0.0009571

51

2279.750.0224

70.0005

0516676.

75

-0.0835

50.0069

81

-0.0018774

51

2323.9250.0193

770.0003

7516453.

76

-0.0133

70.0001

79

-0.0002590

98

2259.4

-0.0277

7

0.0007

71

17705.

01

0.0760

46

0.0057

83

-0.0021114

7

2226.85

-0.0144

10.0002

0816123.

46

-0.0893

30.0079

790.0012868

99

2326.5250.0447

610.0020

0415454.

92

-0.0414

60.0017

19

-0.0018559

42

Sum0.583

6950.081

60219436

4.8

-0.153

070.034

553

-0.006837

624

=nXY-(x)(y)/nx2-(x)2

-0.4152

5





by around 4%

CIPLA RETURNS FOR THE YEAR 2011

44


45/93


Std.

Deviation Variance

January 187 191.95

0.02647058

8 0.05324 -0.02676941 0.000716601

February 192 191.5 -0.00260417 0.05324 -0.05584417 0.003118571

March 188 220.05

0.17047872

3 0.05324

0.11723872

3 0.013744918

April 218.5 240.75

0.10183066

4 0.05324

0.04859066

4 0.002361053

May 243.05 222.8 -0.08331619 0.05324 -0.13655619 0.018647593

June 225 253.35 0.126 0.05324 0.07276 0.005294018

July 253.35 275.05 0.08565226 0.05324 0.03241226 0.001050555

August 277 270.85 -0.02220217 0.05324 -0.07544217 0.00569152

September 271 279.9

0.03284132

8 0.05324 -0.02039867 0.000416106

October 283 287.1

0.01448763

3 0.05324 -0.03875237 0.001501746

November 284.2 320

0.12596762

8 0.05324

0.07272762

8 0.005289308

December 315.1 335.05

0.06331323

4 0.05324

0.01007323

4 0.00010147

Total

0.63891953

5 0.057933459


45


46/93

CALCULATION OF BETA

Price of

Share

Retur

n (x) X2

Sense

x y y2 xy

189.47518327.

76

191.750.0120

070.0001

4417823.

4

-0.0275

20.0007

57

-0.0003304

16

204.0250.0640

160.0040

9819445.

220.0909

940.0082

80.0058250

31

229.6250.1254

750.0157

4419135.

96-

0.01590.0002

53

-0.0019955

72

232.9250.0143

710.0002

0718503.

28

-0.0330

60.0010

93

-0.0004751

48

239.1750.0268

330.0007

218845.

870.0185

150.0003

430.0004968

09

264.20.1046

310.0109

4818197.

2

-0.0344

20.0011

85

-0.0036013

55

273.9250.0368

090.0013

5516676.

75

-0.0835

50.0069

81

-0.0030755

61

275.45 0.005567 3.1E-05 16453.76

-

0.01337 0.000179 -7.4441E-05

285.050.0348

520.0012

1517705.

010.0760

460.0057

830.0026503

75

302.10.0598

140.0035

7816123.

46

-0.0893

30.0079

79

-0.0053430

6

325.0750.0760

510.0057

8415454.

92

-0.0414

60.0017

19

-0.0031533

63

Sum

0.560

425

0.043

822

19436

4.8

-0.153

07

0.034

553

-0.009076

7


-0.4135

8

46


47/93





by around 4%

47


48/93

HCL TECH RETURNS FOR THE YEAR 2011


Std.

Deviation Variance

January 116.5 116.1 -0.00343348 0.1141 -0.11753348 0.013814118

February 111.15 100.2 -0.09851552 0.1141 -0.21261552 0.045205359

March 98 102.05

0.04132653

1 0.1141 -0.07277347 0.005295978

April 100.55 129.85

0.29139731

5 0.1141

0.17729731

5 0.031434338

May 130.55 166.9 0.27843738 0.1141 0.16433738 0.027006775

June 172 185.95

0.08110465

1 0.1141 -0.03299535 0.001088693

July 186 241

0.29569892

5 0.1141

0.18159892

5 0.032978169

August 242 300

0.23966942

1 0.1141

0.12556942

1 0.01576768

September 299 340.8

0.13979933

1 0.1141

0.02569933

1 0.000660456

October 342 306.25 -0.10453216 0.1141 -0.21863216 0.047800023

November 302.5 337.1

0.11438016

5 0.1141

0.00028016

5 7.84926E-08

December 339.95 371.8

0.09369024

9 0.1141 -0.02040975 0.000416558

Total

1.36902280

8 0.221468225


48


49/93

CALCULATION OF BETA

Price of

Share

Return

(x) X2 Sensex y y2 xy

116.3

18327.7

6

105.675

-

0.09136

0.00834

6 17823.4

-

0.02751891

1

0.00075

7

0.0025140

88

100.025

-

0.05347

0.00285

9

19445.2

2

0.09099386

2 0.00828

-

0.0048650

6

115.2

0.15171

2

0.02301

7

19135.9

6

-

0.01590416

6

0.00025

3

-

0.0024128

5

148.725 0.291016 0.08469 18503.28 -0.03306236 0.001093

-

0.00962166

178.975

0.20339

6 0.04137

18845.8

7

0.01851509

6

0.00034

3

0.0037658

88

213.5

0.19290

4

0.03721

2 18197.2

-

0.03441974

3

0.00118

5

-

0.0066397

1

271

0.26932

1

0.07253

4

16676.7

5

-

0.08355406

3

0.00698

1

-

0.0225028

5

319.9

0.18044

3 0.03256

16453.7

6

-

0.01337131

0.00017

9

-

0.0024127

6

324.125 0.01320 0.00017 17705.0 0.07604644 0.00578 0.0010043

49


50/93

7 4 1 8 3 65

319.8

-

0.01334

0.00017

8

16123.4

6

-

0.08932782

3

0.00797

9

0.0011919

56

355.875

0.11280

5

0.01272

5

15454.9

2

-

0.04146380

5

0.00171

9

-

0.0046773

2

Sum

1.2566

35

0.3156

64

194364

.8

-

0.1530667

76

0.0345

53

-

0.044655

92


-

2.064826941

From the analysis we find that the value of beta is -2.064826941. and beta is

here negative it shows that the return of sensex and return of stock have the


This also indicate that if sensex is increase by 10% then stock is decreasedby around 20.6%

50


51/93

INFOSYS RETURNS FOR THE YEAR 2011


Std.

Deviation Variance

January 1116 1306.65

0.17083333

3 0.1459

0.02493333

3 0.000621671

February 1292 1231.25 -0.04702012 0.1459 -0.19292012 0.037218174

March 1218 1323.9

0.08694581

3 0.1459 -0.05895419 0.003475596

April 1331.15 1509.250.13379408

8 0.1459 -0.01210591 0.000146553

May 1520.1 1605.1

0.05591737

4 0.1459 -0.08998263 0.008096873

June 1615.35 1776.5

0.09976166

2 0.1459 -0.04613834 0.002128746

July 1770.55 2064.35

0.16593713

8 0.1459

0.02003713

8 0.000401487

August 2064 2131.15

0.03253391

5 0.1459 -0.11336609 0.012851869

September 2139.95 2306.4

0.07778219

1 0.1459 -0.06811781 0.004640036

October 2330 2206.2 -0.05313305 0.1459 -0.19903305 0.039614154

November 2203 2379.35

0.08004993

2 0.1459 -0.06585007 0.004336231

December 2427 2601.1

0.07173465

2 0.1459 -0.07416535 0.005500499

Total 0.87513692 0.11903189

51


52/93

6


CALCULATION OF BETA

Price ofShare

Return (x) X2

Sensex y y2 xy

1211.32518327.

76

1261.6250.0415

250.0017

2417823.

4

-0.027518

9110.0007

57

-0.001142

72

1270.950.0073

915.46E-

0519445.

220.090993

8620.0082

80.000672

559

1420.20.1174

320.0137

919135.

96

-0.015904

1660.0002

53

-0.001867

66

1562.6

0.1002

68

0.0100

54

18503.

28

-0.033062

36

0.0010

93

-0.003315

08

1695.9250.0853

230.0072

818845.

870.018515

0960.0003

430.001579

755

1917.450.1306

220.0170

6218197.

2

-0.034419

7430.0011

85

-0.004495

97

2097.5750.0939

40.0088

2516676.

75

-0.083554

0630.0069

81

-0.007849

06

2223.1750.0598

790.0035

8516453.

76

-0.013371

310.0001

79

-0.000800

66

2268.10.0202

080.0004

0817705.

010.076046

4480.0057

830.001536

715

2291.1750.0101

740.0001

0416123.

46

-0.089327

8230.0079

79

-0.000908

8

2514.050.0972

750.0094

6315454.

92

-0.041463

8050.0017

19

-0.004033

41

52


53/93

Sum0.764

0350.072

34919436

4.8

-0.153066

7760.034

553

-0.020624

32


-0.8098

5

From the analysis we find that the value of beta is -0.80985 and beta is here



This also indicate that if sensex is increase by 10% then stock is decreasedby around 8%

M&M RETURNS FOR THE YEAR 2011


Std.

Deviation Variance

January 276 302.25

0.09510869

6 0.11799 -0.0228813 0.000523554

February 295 311.7

0.05661016

9 0.11799 -0.06137983 0.003767484

March 305 383.65

0.25786885

2 0.11799

0.13987885

2 0.019566093

April 384.85 487.95

0.26789658

3 0.11799

0.14990658

3 0.022471984

May 501 668.9 0.33512974 0.11799 0.21713974 0.047149667

53


54/93

1 1

June 674 691.25

0.02559347

2 0.11799 -0.09239653 0.008537118

July 698.7 859.050.22949763

8 0.117990.11150763

8 0.012433953

August 876.65 863.65 -0.01482918 0.11799 -0.13281918 0.017640934

September 865.05 883.2

0.02098144

6 0.11799 -0.09700855 0.00941066

October 892 921.95

0.03357623

3 0.11799 -0.08441377 0.007125684

November 930 1029.35

0.10682795

7 0.11799 -0.01116204 0.000124591

December 1079 1080.85

0.00171455

1 0.11799 -0.11627545 0.01351998

Total

1.41597615

9 0.162271703


CALCULATION OF BETA

Price ofShare

Return (x) X2

Sensex y y2 xy

289.12518327.

76

303.35 0.04920.0024

2117823.

4

-0.0275

20.000757

29

-0.0013

5

54


55/93

344.3250.1350

750.0182

4519445.

220.0909

940.008279

8830.0122

91

436.40.2674

070.0715

0719135.

96-

0.01590.000252

942

-0.0042

5

584.950.3403

990.1158

7118503.

28

-

0.03306

0.00109312

-

0.01125

682.6250.1669

80.0278

8218845.

870.0185

150.000342

8090.0030

92

778.875 0.1410.0198

8118197.

2

-0.0344

20.001184

719

-0.0048

5

870.150.1171

880.0137

3316676.

75

-0.0835

50.006981

281

-0.0097

9

874.1250.0045

682.09E-

0516453.

76

-0.0133

70.000178

792-6.1E-

05

906.9750.0375

80.0014

1217705.

010.0760

460.005783

0620.0028

58

979.6750.0801

570.0064

2516123.

46

-0.0893

30.007979

46

-0.0071

6

1079.9250.1023

30.0104

7115454.

92

-0.0414

60.001719

247

-0.0042

4

Sum

1.441

884

0.287

87

19436

4.8

-0.153

07

0.034552

606

-0.024

73


-2.345281

405

From the analysis we find that the value of beta is 2.345281405 and beta is

here positive it shows that the return of sensex and return of stock have the

positive relationship.

This also indicate that if sensex is increased by 10% then stock is increased

by around 23.5%

55


56/93

ONGC RETURNS FOR THE YEAR 2011


Std.

Deviation Variance

January 667 654.95 -0.01806597 0.63876

0.62069403

3 0.385261083

February 650.3 691

0.06258649

9 0.63876

0.70134649

9 0.491886911

March 664.05 780.2

0.17491152

8 0.63876

0.81367152

8 0.662061355

April 780 864.75

0.10865384

6 0.63876

0.74741384

6 0.558627457

May 898.7 1169.25

0.30104595

5 0.63876

0.93980595

5 0.883235234

June 1171.1 1069.3 -0.08692682 0.63876

0.55183317

9 0.304519858

July 1065.2 1164.05

0.09279947

4 0.63876

0.73155947

4 0.535179264

August 1165 1185.5

0.01759656

7 0.63876

0.65635656

7 0.430803942

September 1175.55 1172 -0.00301986 0.63876

0.63574013

7 0.404165522

October 1175.45 1131.8 -0.03713471 0.63876

0.60162528

6 0.361952984

November 1144.9 1199.75 0.04790811 0.63876 0.68666811 0.471513099

56


57/93

4 4

December 1204 1178 -0.02159468 0.63876

0.61716531

6 0.380893027

Total 0.63876 5.870099736


CALCULATION OF BETA

Price ofShare

Return (x) X2

Sensex y y2 xy

660.97518327.

76

670.650.0146

370.0002

1417823.

4

-0.0275

20.000757

29-

0.0004

722.1250.0767

540.0058

9119445.

220.0909

940.008279

8830.0069

84

822.3750.1388

260.0192

7319135.

96-

0.01590.000252

942

-0.0022

1

1033.9750.2573

040.0662

0518503.

28

-0.0330

60.001093

12

-0.0085

1

1120.20.0833

920.0069

5418845.

870.0185

150.000342

8090.0015

44

1114.625

-0.0049

82.48E-

0518197.

2

-0.0344

20.001184

7190.0001

71

1175.250.0543

90.0029

5816676.

75

-0.08355

0.006981281

-0.00454

1173.775

-0.0012

61.58E-

0616453.

76

-0.0133

70.000178

7921.68E-

05

1153.625

-0.0171

70.0002

9517705.

010.0760

460.005783

062

-0.0013

1

57


58/93

1172.3250.0162

10.0002

6316123.

46

-0.0893

30.007979

46

-0.0014

5

11910.0159

30.0002

5415454.

92

-0.0414

60.001719

247

-0.0006

6

Sum0.634

0450.102

33319436

4.8

-0.153

070.034552

606

-0.010

36


-0.515070

534

From the analysis we find that the value of beta is 0.515070534 and beta is

here positive it shows that the return of sensex and return of stock have the

positive relationship.

This also indicate that if sensex is increased by 10% then stock is increased

by around 5%

58


59/93

REL RETURNS FOR THE YEAR 2011


Std.

Deviation Variance

January 1240 1323.6

0.06741935

5 0.00723

0.06018935

5 0.003622758

February 1290 1266.05 -0.01856589 0.00723 -0.02579589 0.000665428

March 1228.7 1524.75

0.24094571

5 0.00723

0.23371571

5 0.054623035

April 1523 1806.25

0.18598161

5 0.00723

0.17875161

5 0.03195214

May 1851 2271.9 0.2273906 0.00723 0.2201606 0.04847069

June 2330 2023.4 -0.13158798 0.00723 -0.13881798 0.019270432

July 2029.9 1955.4 -0.03670132 0.00723 -0.04393132 0.00192996

project report risk and returns of securities

Documents